Final Report

Market Demand Assessment for

E - B a n k i n g S e rv i c e s i n P a l e s t i n e
July, 2009

Study conducted for and supervised

By

Association of Banks in Palestine - ABP

&

Palestine International Business Forum - PIBF, Palestine

Conducted By

Al Markaz for Development and Marketing Consultancies:

Team leader Ahmad Uwaidat,

Muhammad Eid, Maher Sbieh
In cooperation with Lagerkvist & Sner AB

Table of contents
1- Background ............................. 5
Objective .............. 5
Relevance ............ 6
2- Introduction: Study approach & methodology ...... 6
3- Study limitations .......... 8
4- Executive Summary ....................................... 10
5- International trends in e-banking ....... 12
5.1 General definition of E-Banking services ..................... 12
5.2 International Developments in E-banking Business Models .........................12
5.3 Focus on E-banking in Sweden: trends in mature markets ..................... 13
5.4 Growth potential and track record in comparable markets ...........................14
6- Palestinian Banking sector, current situation, facts and figures ............ 15
7- Critical success factors in e-banking industry: demographics & industry life cycle in Palestine ......................... 21
8. Implications on Investments in Expanded Electronic banking services .......... 25
Market Insight on Current e-banking Services
9- Retail e-banking services in Palestine ........ 28
9.1 Retail e- banking user profiles (based on the banks reports) ......... 28

9.2 Retail e-banking trends, preferences and factors ....... 30

9.3 Reflections on Retail e- banking Services ........ 31
9.3.1 ATM Card Services ......... 32
9.3.2 Credit Card Services ...... 37
9.3.3 Visa Electron Cards ........ 48
9.3.4 On-line Banking ....... 58
10- Reflections on Corporate e-banking services ..... 63
10.1 Trends in Corporate IT diffusion .... 64
10.2 Corporate usage of e-banking users ...... 66
Market demand as driving force for Investment
11- The Appropriate business model for E-banking service ... 74
12- Summary of Potential revenue / Income forecast for the proposed company ................ 75
13- Conclusions and Recommendations ..... 77
13.1 Market demand for wider scope of services and growth trends ...................... 77
13.2 National System for IBAN ... 79
13.3 Growth in new users strongly linked to product availability ................... 79
13.4 Summary of driving factors for transaction growth .................. 79
13.5 Investment opportunity is confirmed yet all-inclusive financial feasibility needs further study......................................... 80

14- Next Steps .... 80

Enclosures:
Enclosure 1 General Guidelines for improved marketing of electronic banking service by Palestinian Banks ............................. 83
Annexes:
Annex 1 Study Approach and Methodology .... 85
Annex 2 Retail Users Profiles . 88
Annex 3 Revenue and Income Assumptions . 90

1: Background
The Association of Banks in Palestine (ABP) and the Palestine International Business Forum (PIBF) have endeavored since 2007 to
facilitate the spread of e-banking services within the Palestinian Banking industry. As part ABPs vision to develop the banking industry
in Palestine and in relation to PIBFs long-term aim to enable private sector efforts toward economic sustainability in Palestine, a successful partnership has been created between the two organizations under a common objective due to both PIBF and ABP recognition
of banking industrys strategic relevance in mobilizing growth in other key industries.
Toward that end, PIBF and ABP have successfully completed the 1st stage of the project which revealed the availability of the needed
technical infrastructure in Palestine to deliver key electronic banking services of; ATM/EFTPOS, credit cards and on-line banking payments. The study was completed in December 2007.
The study concluded that a transformation into a national solution could and should be done in Palestine and proposed two possible
options; one being in-house solutions and two is an external service solution. While the study did not present extensive arguments for
either option since much of the decision is reliant on the size of demand and market potential while a second variable closely involves
the intents of specific interested parties willing to invest; both variables were not part of the scope of the 1st phase of the study.
In the first phase of the study, the study team put forth a recommendation to asses market demand for e-banking services in Palestine
which would reveal much needed insight to instigate committed stakeholders toward making investment decisions as such the needed
follow-up by those toward either option. As such, the pursuit of the 2nd phase of this project is to fulfill the recommendation of the study
team and to further the joint mission for ABP through its Board members decision and PIBF through its board members decision.

Objective
The objective of the 2nd phase was to provide relevant information to estimate the Palestinian market size and assess potential market
demand for three specific e-banking services as an indicators; ATMs, EFTPOS, cards and on-line banking.
Toward that end, a specialized team of local and international consultants was contracted to conduct the required demand and supply
analysis for the three key e-banking services in Palestine.

Relevance
Expanded and optimal use of electronic banking services whether through in-house solutions or a national system managed by a local
company linking all participating banks is envisaged to contribute greatly to grow the customer base and frequency of use for e banking
services, enhance the customer trust and satisfaction, and increase the profitability of the banks through optimizing the performed transactions. Benefits of improved e-banking services are seen to have a positive spill over on all segments of society, particularly utilities,
corporate and even individual retail banking clients both local and international in the case of the tourism industry. Cost efficiencies
related to physical handling for banks is an obvious and indisputable benefit while value for banking clients in terms of their own efficiencies in the case of corporate clients is a clear outcome and while retail clients value in terms of convenience and time values cannot
be understated through e-banking services.
The most immediate relevance of the study is imbedded in the ability of its outcomes to provide a concrete set of indicators to expose
the potentials for new investments in the field e-banking services. From this angle, the study is relevant to investors seeking to explore
new and unique areas for their investments in Palestine. Hence this study could be utilized as one of the foundations to build the needed feasibility study and business plan in the future.
Furthermore, the study outcomes are highly relevant to Palestinian banks, particularly to better serve their client base through improved
marketing strategies in line with this demand assessment and market analysis.

2. Introduction: Study approach & methodology

The study has been conducted by Al Markaz for development and marketing consultancies team of qualified consultants with background in market research, Business development, banking services, and surveys & evaluation techniques.
Lagerkvist & Sner AB has supported the work with emphasize on reference facts from an international perspective and acted as a
general support on various technical aspects.
The overall objectives of this study were to identify the potential demand for the various electronic banking services that may be provided on a national coordinated level by the working banks in Palestine and to assess the projects economic viability by extracting key
indicators to determine the potential returns on different stakeholders under optimistic and pessimistic scenarios.

Specifically, the study:

Defined the main electronic banking services available in Palestinian banking industry

Estimated the market size in terms of volume and value of the current electronic banking services in Palestine

Estimated the potential revenue of these services

Assessed customer awareness and level of utilization of these services

Assessed customers satisfaction, and potential growth levels of usage of e-channels

Defined the driving factors for establishment of an economically viable national banking services system and company

The study was based on the following approach:

1. Literature review of local, regional and international trends in e-banking
2. Quantitative surveys for retail clients, corporate clients and Palestinian banks
3. Qualitative interviews with local and Swedish experts in the banking industry
4. Analysis

The

literature review covered international and trends in e-banking services,

the development of the questionnaires for the surveys.

Palestinian

banking sector overview and guided

Three distinct surveys were conducted to generate quantifiable information needed in relation to market demand, potentials, trends and
preferences and finally current supply by Palestinian banks that will later represent the actual client base for the intermediary banking
Services Company:
1. The first survey was made up of a representative sample of 790 retail banking clients geographically distributed in all banks branches located in West Bank and Gaza Strip. Sample selection for the retail banking clients was based on a sample size enough to ensure statistically

significant coverage for all banks, their clients at their various geographical branches. In order to include most of the clients segments,
the sample size was proportionally distributed on the branches of different banks operating in cities and villages spread out in the center,
north and south of West bank and Gaza Strip. In each branch a systematic random sample of at least 20 clients was interviewed resulting
in 100% response rate.
2. The second survey, a judgment sample of 47 leading Palestinian corporate/commercial segment through direct interviews, response rate
was consequently in practice 100%.
3. The third surveyed 21 Palestinian banks through questionnaires sent by fax and returned by banks, 50% response rate due to possible
multiple reasons.

Finally the quantitative interviews were used to validate outcomes and to address key stakeholders interest and views toward the creation of national system and a banking services intermediary company.
The team conducted this study during the months of January-May of 2009. Details of the study approach and methodology can be
found in Annex 1 titled study approach and methodology.

3. Study limitations
Statistical material for the current demand for e-banking services, specifically based on the current in-house business model can be
considered highly adequate and sufficient for assessing primary current demand and trends and opportunities for e-banking services
by end users of these services, being the retail and to a lesser extent the corporate market segments.
The main limitation of the study relates to assessing the impact of the above opportunity on the main financial indicators for banks and
the proposed new business model. This aspect of the study is partial and complementary in nature to the overall objective. This limitation is a result is due to the status of the current suppliers of these services being the future market for the intermediary banking service
company namely Palestinian banks. Specifically, the low rate of response by Palestinian banks lead the study to make assumptions
and speculations based on international trends and identified opportunities form the retail survey toward the said company only.
It is believed that and due to the end user being the same now and in the future, the above limitation is minimized since it is this segment

who drives growth according to trends in preferences despite the business model of choice to deliver e-banking services. In essence,
the outcome of the end user retail survey is sufficient to be a basis for the identified opportunities in e-banking services which may
come under any type of investment either through the in-house model or intermediary banking services model.

Specific limitations include:

1. Only 11 banks out of 21 replied on the questionnaires that were distributed through the Banks Association.
2. Even the banks which responded positively, provided partial information, and a lot of critical important questions were not answered, especially those questions relevant to the customers segments, profile, revenue volume and structure, allocated costs for the services, cost
structure due to some sort of block, hesitance or incapacity by banks to give out such information
3. The study team had to draw conclusions based on the partial information available, assumptions and international bench marks. the aforementioned information was assumed to be an essential base for extracting the financial viability indicators on the proposed company,

Some critical facts were identified not relevant to this study yet highly relevant to the development Palestinian banking industry:

Identified that the current architecture of the data bases in Palestinian banks does not enable reporting about the aspects of e channels
without getting in a highly complex data retrieval process.

The corporate sample was a judgment sample that was aimed to reflect the perception of big leading companies regarding the e banking
attributes, toward that end, the results are sufficient. The companies were conservative regarding reporting about the size and percentages
of their banks operations, this was expected and accepted while it does not affect the objective of the study.

The utilities companies were also very cautious to respond on the inquiries of the study team. More than 2 months of following up, none of
the utility companies provided information except the Paltel which provided part of the information.

Consequently, the studys data can address the demand potentials and key factors driving growth as it is deemed sufficient to give
clear indications for estimated volume and market opportunities for the defined e-banking services according to statistical indicators
from the retail survey.

4. Executive summary
Electronic banking services in Palestinian are witnessing the start of the growth stage in this industrys life cycle; hence this an appropriate time for the possible transformation to an expanded business model of an intermediary banking Services Company based on
the below expected benefits to the banking industry and banking clients:

Economies of scale in investments, in revenue stream and in operating cost for Palestinian banks

Synergies in intra-banking relations resulting in value added services and effective communication to e-banking service users also for
Palestinian banks

Convenience, low cost and quality and service variety for Palestinian end user.

The nature of the joint company should first hand take care of back office functions in e-banking allowing each bank to develop their
own profile and product packaging. As such, this company is proposed from pure business logic given the sharing operating cost, investments and expensive cost of service development. The products each bank offers their clients will still be their own competitive
advantage/disadvantage irrespective of what a joint company will handle on behalf of respective client banks.
The expected revenue stream from these services is almost guaranteed to increase if managed proactively while as the research
indicated the difference between on-counter handling of transactions and electronic virtual handling is significantly high, as the cost
differences ranges between $1.5 -2 per transaction for on-counter handling versus about 20 cents in case of ATMs transaction, while
few cents for internet based banking services. Transferring towards e banking will have the potential to increase profit margins significantly.
Most importantly the key success indicator in this industry being IT diffusions within society was clearly reflected in our study to be
positive in terms of availability of computers and internet access at home as such ensuring that these services have the necessary
household infrastructure to be strongly anchored now and in the future.
The study team can conclude and based on all indicators reflected in this report, particularly retail trends, satisfactions and factors
influencing use of the key e-banking services demonstrate the increasing consumer awareness, demand and readiness for ex-

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panded e-banking services in Palestine.

Furthermore, other market variables are positive indicators toward the advancement of e-banking services through a potentially stronger business model being an joint intermediary banking Services Company due to the assumed multiple benefits to different segments
of the society. Particularly given that the initial investment needed to develop this market and build awareness for these services has
already been made by the early entrants. This market status has lead to a clearly stated demand by users of electronic banking services in the form of availability being one of the top factors influencing their use during this survey.
For the customers, the surveys provide concrete evidences that users of e banking are highly satisfied from different types services
once they feel it is secured channel, as cash withdrawal through ATMs pick high satisfaction levels, and the majority of the clients use
it and became familiar with its usage. However the other e channels that requires more of an awareness, IT access and education
still being used by minority of the clients, but these services is strongly correlated with the spread of internet and IT usage among the
clients, which is being accelerated on high pace in the latest years.
Despite the fact that this study has not extensively covered the pros and cons of various business models for provision of e-banking
services yet the basis for the conclusions and recommendations are guided by the statistical outcomes of the retail survey reflecting
the presence of unfulfilled market demand in addition to trends in international and similar markets. Being the case, these indicators
together with the current situation in Palestinian banking sectors e-banking services imply that the current model is assumed inefficient in exploiting overall market demand and growth potentials while it may be efficient on the level of each bank independently. As
for international trends, best practices have been reflected upon briefly which demonstrate the extensive benefits gained by banks;
banking clients and the overall economy from development of e-banking services through business models based on inter-banking
cooperation.
It can be concluded that both sides of the banking industry equation, the supply side represented by the banks, and the demand side
represented by various segments of the customers will highly benefit from more investments and developments in e banking services.
The value of the intended proposed business model can be identified in the context of economies of scale and synergies from linking
providers and customers through the expanding and optimizing e-banking services which are expected to reduce cost as physical
handling of various banks transactions decrease.

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5. International trends in e-banking

5.1. General Definition of E-Banking services.
E-banking has in many international markets developed rapidly over time. E-banking being common and joint description for many
services with different content, application and product packaging.
The basic definitions for e-banking services from a users perspective is conducting financial transactions electronically, without physically interacting with the bank (i.e. using visa card, visa electron, internet banking, other). While another definition for e-banking services from the providers perspective is the use of different telecommunications channels reliant on digital language to conduct a series
of financial transactions for individuals, corporate and government entities without physical interaction.
Several core variables have brought about the materialization of e-banking services. First variable is the accelerated pace of developments in the Information Communication Technology industry and the internet revolution have played a major role in providing the
technical infrastructure needed to bring in innovations within banking services.
While the second and critical variable contributing to the evolution of e-banking services business models is the changing lifestyles of
banking clients in the western world and to a lesser extent in the developing countries due to trends in urbanization and globalization.
More and more, banking clients seek to conduct their financial transactions in the least amount of time, most convenient locations
and with the lowest cost possible.

5.2. International Developments in E-banking Business Models

Due to the above trends, several business models for e-banking services have emerged. The embryonic model is in-house solutions
provided by each bank independently to their own clients. Generally, this model is limited in its ability to provide e-banking services
with least amount of time, most convenient locations and with the lowest cost possible.
Given that e-banking services are complementary services rather than core banking services, maintaining them in-house in the long
run will possibly take resources away from core banking services; while at the same time could limit diversity in electronic banking
service mix and more importantly are bound to be underutilized as far as market potential and investments made.

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Another model for provision of e-banking services is through outsourcing the service from banks to an intermediary banking Services
Company, concerning back office functions, offered to client banks customers. Benefits of this model are built on synergies and
economies of scale through intra-banking relations managed by the host banking Services Company. Given that e-banking services
are the core revenue generating stream for the service company, this model could allow for ensuring maximum economies of scale,
more diversified mix of e-banking services and finally consistent service quality to its clients.
A third model of e-banking services directly services retail banking clients through connecting them directly with commercial channels.
PayPal is such a form of e-banking business model. This model requires a much higher level of consumer/end user awareness in
addition to the commercial infrastructure to service as a platform. Pay Pal model cannot substitute customer need from a perspective
of the services offered through banks yet it is another form of complementary electronic services.
Other variations of business models also exist for different services. For example, in countries such as USA, UK, Germany, France
and Australia a large percentage of ATM machines are not managed by banks, rather by credit unions, building societies and independent deployers. Under this model, all banking customers have access to all ATMs in the country, free of charge except when cash is
withdrawn from special labeled ATMs or from ATMs which are managed by the above non-bank entities. Interestingly, the ATMs business is highly profitable in case of the USA According to the latest General Accounting Office figures, banks make $1.9 billion a year
in surcharges for ATM transactions.

5.3 Focus on E-banking in Sweden: trends in mature markets

From available statistics we can clearly see the rapid development in transaction volume that seems to persist over time, also in markets that must be considered mature.
From the statistics of European Central Bank we can for instance look upon the following examples as an indication for a mature market, in this case Sweden.

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Transaction volume, all transactions in millions

Indicator

Year 2000

Year 2007

All Transaction volume

1.212.900

2.192.000

Number of checks

2.0

1.0

Cards, credit, transactions

64

92

Cards, debit, transactions

256

1.143

ATM cards issued

4.8

9.8

In a total population of around 8.5 million, Sweden currently has approximately 7.0 million registered Internet bank users according
to Swedish Bankers Association, as some clients have relations to more than one bank the estimated numbers of unique users are
around 4.5 millions, a figure that is expected to increase further.
As a reference it should though be noted that 90 % of all Swedes between the ages of 17-75 uses internet. Internet access in the home
is now around 89%.

The

Swedish Bankers Association several

development focus for the coming period. Among these:
outlook from

different areas within e-banking are expected to be under particular

person to person mobile payments system to allow replacement for cash payments

Increased security for internet shopping and payments, e-trade.

electronic invoicing

general issues relating to speed and ease of access

5.4 Growth potential and track record in comparable markets

From two recent studies, in Azerbaijan in 2004, and in Kyrgyzstan in 2005, several interesting findings were present. Both these markets could be assumed to have some similarities with Palestine. Partly in terms of size but above all with reference to the fact that they
also are developing markets.

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Examples of some findings (Source:TietoEnator)

Sustainable growth, depending on network development, around 30% per annum.

Growth expectations noted as high as high as 50% per annum.

Limited difference in growth potential between age groups

Study covered from a customer perspective ATMs, cards and the development of internet banking.

Number of banks present on above market is 120 banks

Size customer base is approximately, 13,2 millions individuals

6. Palestinian Banking sector, current situation, facts and figures

There are 20 banks (all of which are privately owned) working in the Palestinian territories. Of which, 50% are domestic; 17 are commercial and three are Islamic banks. The majority of the foreign-owned banks are Jordanian. The Arab Bank is the dominant market
leader with around 40% of total assets and more than 160 bank branches throughout the Palestinian territories.
Other financial institutions specifically non deposit-taking institutions also operate in Palestine.
Generally, Palestinian banking sector responds quickly to the new trends that take place in the world, partially because of their direct
linkage of Palestinian banks to headquarters in Jordan, regional and expansions in international networks. However this linkage could
also limit Palestinian banks from independent decision making for needed developments.
Despite the recent trends in heated competition amongst Palestinian banks, particularly in the retail segment, it is believed that the
service offer amongst all banks is still generic in nature when it comes to the quality of banking services. As it appears the competition
tools being used boil down to two by larger banks:

Offering more e-banking services given their ability to invest in the needed equipment and software.

Offering the typical promotional prizes related to holidays, financial prizes, cars, etc.

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Transformation of the Palestinian banking systems from paper to electronic based transactions has been more pronounced over the
past few years. E-banking services became more familiar and acceptable for individuals and institutional banking clients in Palestine.
More and more customers shifted to using available e-banking services (ATM, visa card, visa electron, internet banking) due to the
time and cost savings involved. ATM was the first electronic channel introduced in the banking industry in Palestine. In recent years,
the overwhelming majority of working banks in Palestine have introduced this service, and client familiarity with, and usage has grown
significantly.
More precisely the initial investment to develop the market awareness and demand for e-banking services has been made hence the
market for these services will only witness the growth stage in the coming years.
In Palestine, the current business model to deliver e-banking services rests on in-house solutions provided individually mainly by large
size banks. There is no national system linking all Palestinian banks within a unified network of inter-banking agreements which will
expedite the development of e-channels to include ATMs, commercial points of sale and utilities payments as such ultimately efficient
and optimal e-banking services to the end user. Worth noting is that the current IT infra structure in the banks is sufficient to enable
the implementation of all routine e-banking transactions on line such as account transfers, balance inquiries, bill payments, and Stop
payment requests.
The total deposits in the Palestinian banking sector in 2008 are 5,846,878,805 as shown in the following table:
Bank Accounts

Number

Value in US$

Current accounts

895,030

2,059,060,724

Savings accounts

974,549

1,389,586,725

Term deposits

183,669

2,398,231,356

Total

2,053,248

5,846,878,805

Reflections on current transaction volumes

A among the wide range of e banking services, about 9 are currently present in Palestinian banking industry. Field work revealed

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almost all of the banks deal with various numbers of e-banking services. The banks that provide these services widely vary in terms
of volume and value of transactions generated through these services. Generally, ATMs are the most well known and widely used by
salaried employees, and most of the banks either already ATMs, or are under establishment phase.
The total number of different type of cards is summarized in the following table according to the PMA:
Type of the card

Total number in banking sector

Number of ATMs cards

62,180

Number of Credit cards

18,017

Debit cards

233,795

The summary of the volume/value on e-banking services that is reported from Palestinian Monitory Authority (PMA) is shown in the
following table:
E-Service type

Number of movement

T. Value in US$

ATMs cards

3,515,116

909,792,821

Credit cards

140,295

28,162,984

Debit cards

1,302,489

351,536,763

Total

4,957,900

1,289,492,568

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Supply of ATM
Based on the PMA reports, 15 banks out of 20 working banks (In addition to two banks which reported that they are currently in the
process of installing the ATMs) currently provide ATM service, through 240 stations distributed all over the districts of WB and Gaza,
the distribution of these ATMs is shown in the following chart:

Chart: Regional distribution of ATMs in WBGS (number of ATMs)

76

73

50
41

North WB

18

Center WB

South WB

Gaza Strip

Most of the banks provide it is own ATM machines adjacent or close to the their branches, only few banks have spread their ATMs in
several centers in addition to those adjacent to the branches, including Arab bank, Cairo Amman Bank, Arabic-Islamic Bank, Bank of
Palestine.

Volume of ATM transactions

Based on the survey findings, 9 out of 11 surveyed banks, reported that they provide ATM service, through 189 stations distributed
all over the districts of WB and Gaza, The estimated total 2008 volume of ATM cards for the surveyed banks is summarized in the
following chart:
Chart: Number of ATM Cards in 2008, active, inactive, canceled cards
10,307

1,799
56
Active cards

Inactive cards

Cancelled cards

Approximately 3,497,002 ATM transactions were reported by 6 banks for 2008.

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Supply of Point of sales

Based on the information provided from PMA sources, total number of point of sales who provide credit cards terminals is estimated at
1,248 point of sales distributed over all regions of West Bank and Gaza. It is worth to mention that all of the point of sales machines is
provided by one leading bank in Palestine. The regional distribution of points of sales is shown in the following chart:
622

251

224

151

North WB

Center WB

South WB

Gaza Strip

Point of sales are relevant to business arrangements could be one promising field that can attract many of the in the service industry,
tourism, retail and wholesale in Palestine, the growth of point of sales will be correlated to the expansion in the usage of credit cards
and visa electron cards. This field could be one of core roles that can be linked to the proposed company, as it could integrate between
the banks regarding the establishments and distribution of the point of sales network, and it will arrange the links with the merchants
and other business entities.

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7. Critical success factors in e-banking industry: demographics & industry life cycle in Palestine.
When speaking of key factors influencing the growth for e-banking services, it is critical to point out that there multiple external variables
which either contributes to growth or slowdown the provision of these services. Globalization, urbanization and demanding lifestyles
as will be demonstrated in the upcoming aggregate statistics have imposed new trends on the Palestinian people like elsewhere in
developing countries. These trends in lifestyle represent the key drivers for current and future demand for e-banking services. A more
obvious trend toward globalization is the drastic increase and reliance on internet access.
The most prominent and complex success factor which must be present to positively influence the growth of e-banking services is the
degree of IT diffusion within the various segments of society. Availability of PCs, use of software to conduct various tasks and internet
use are all indicators to the degree of IT diffusion. This correlation was validated in our studys findings in the retail client survey which
showed that:

84.3% of those who use at least one e-banking service have computer at home

89.7% of those who use at least one e-banking service have internet at home

According to the Palestinian Information Technology Association at the time of this study, the following are some of the ICT key indicators in Palestine of relevance for the retail customers:

32.8% of households own a computer

50.9% of persons (10 years and above) use the computer

15.9% of households have access to the internet

50.8% of households have fixed phone line

81% of households own at least one mobile phone

49.9% of the persons (10 years and above) who use the computer know how to use the internet.

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18.1% of persons aged 10 years and above are Internet users

58.3% of persons aged 10 years and above have e-mail accounts

Worth noting that our Retail customers survey showed much higher indicators, namely:

71% of respondents have computers at home

52% of respondents have internet access at home

34% of respondents have internet at work.

Indicators from PITA and from our survey in comparison to expected levels of the above indicators five years ago; one can safely detect
a substantial growth trend in ICT diffusion.
Despite of the lack of national statistics on the number of internet subscribers, t is estimated that the number of internet subscribers in
Palestine has almost tripled over the past three years to reach 72,834 in 2008 as per the figures provided by Hadara (the main internet
service provider in Palestine) recognizing that Hadara is one of many internet services providers. While another indicator, is the slow
increase in the number of fixed line subscribers in Palestine, reflecting future trend in the growth of internet subscribers. Trends in
growth are reflected in the below charts.

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Growth of ADSL subscriptions in Palestine (2006-2008)

72,834

76,861

55,809

27,172

2006

2007

2008

Mar -09

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Growth of fixed lines in Palestine (2006 March 2009)

357,509

350,442

341,330

2006

24

2007

2008

8. Implications on Investments in Expanded Electronic banking services

Key success factors identified internationally which influence growth in e-banking services industry are covered successively in the
below table in relation to the study outcomes for status in Palestine and their implications on areas indicating the need for new investments develop e-banking industry:

Key Success factors & indicators on industry

maturity stage

General Status in Palestine

Implications on new investments or proposed

business model

Legal and regulatory intent to develop e-banking services

PMA is highly committed and has the positive intent to

develop e-banking services in Palestine

Positive environment, intent of PMA to establish the

National system for a shared application to facilitate interbank electronic switching capability.

Degree of ICT diffusion in society:

Availability of PCs
Internet subscriptions
Internet use

Retail: User survey outcomes:

71% of respondents have computers at home
52% of respondents have internet subscriptions
2 hours/day is median time using internet

ICT diffusion very positive compared to previous years.

User exposure to service is quite high yet not 100%.
Indicating that entry is quite easy, expected and the majority
investment needed to develop users has already been made.
The above reflects that this market has surpassed the
introduction phase, and is now entering the growth phase.

Demographics indicators for users and potential users of

e-banking services:
% of population in age range of using banking services
(15 and above)
% of population living in urban cities
% of population receiving income as employees
Note: As per PCBS statistics.

On average 2 million potential retail users for banking

services, plus app. 90,000 establishments.

51% of the population is between 15 - 64 years,

app. 2 million individuals
55% of those employed in Palestine generate their
incomes from salaries
53% of the population is residing in urban cities
116,804 economic establishments including public,
private and NGOs in Palestine

Key demographic indicators relating to trends in urbanization

positively indicate growth in demand for e-banking services.

25

overwhelming majority of the service

establishments use the computer in their
operations

E-banking services user readiness for transformation:

# of years of exposure

Alignment of user profile to social demographics

Factors influencing retail segment to use e-banking

services

Distribution Channels for e-banking services:

# of ATM machines and spread
# of credit cards and spread
# of debit cards and spread
Trend in POS
% PC & internet subscriptions.

26

Users exposed to e-banking more than 2 years

ago: 62% to ATMs 51% to Credit cards, 69% Visa
Electron.
Are age 25 39 mainly using internet banking and
Visa Electron
Have the educational attainment between
Secondary schooling and bachelors degrees
Are employees of public institutions and private
companies
Have a monthly income between NIS 1,501 3,50

User friendliness, services availability and spread of

service channels (ATM, POS) are by far the highest
rated factors influencing use of e-banking services
while commissions and safety are the lowest rated
factors.

240 ATM stations are present and owned by 15

banks in WBG.
1,248 point of sales, majority in Central WB.
Noticeable rise in discount cards.
71% own PC while 52% have internet at home.

Initial investment for market development has been made; as

such momentum is there for building on present investment
foundation.
Level of exposure being more than 2 years indicates the
entry into growth stage for e-banking industry. Users will be
expecting and seeking more e-banking services.
User profile is extremely close to social demographics of
Palestine, indicating that this is not a niche service rather a
service which will be demanded by masses in relative terms
to the small size of Palestine.
The factors influencing usage reflect a high level of
awareness, in other words they are over safety and
commissions and seeking service availability and user
friendliness.

Distribution channel infrastructure is present for e-banking

services yet numbers are still quite low in terms of
geographical spread, POS and household IT penetration
reflection the need for more investments to capture
momentum from growth in demand.

The 20 Palestinian banks serve four main segments of Palestinian society, individuals through retail services, corporate through commercial services and governmental and non-governmental institutions. As per Palestinian Central Bureau of statistics, the Palestinian
population is approximately 4 million in West Bank and Gaza. The Palestinian population has experienced an upward growth rate
exceeding 30 percent. This indicates that the population in the Palestinian territory is expected to reach 5 million in 10 years.
Approximately, 51% of the population is between 15 - 64 years of age which represents legal age for employment.
Approximately 55% of those employed in Palestine generate their incomes from salaries and wages. Another important demographic indicator is that 53% of the population is residing in urban cities while this trend is also growing, reflecting that the need for fast,
convenient and low cost e-banking services will be more demanded as trends for fast, easy and low cost services become more the
standard of life.
Additionally, the total number of economic establishments including public, private and NGOs in Palestine is estimated at 116,804
majority of which are involved in internal trade and services sectors while 16% are involved in manufacturing as per the PCBS 2007
statistics.
The type of banking services naturally varies widely amongst different segments and sub-segments due to their different needs. Yet
during the surveys it was demonstrated that banks have not expanding on the concept of segmentation and customer profiling to lead
their strategies for better servicing the Palestinian market.
These critical success factors and trends indicate that the electronic culture is becoming the norm and the familiar mode of living in
Palestine. This on its own represents the core of viability for investment and growth in electronic banking services.
In view of historic international trends the internet use and recent trends in Palestine, a general higher internet access, tied to demographical trends and a tactical pricing concept for over counter cash payments will further drive the use of new e-banking payment
solutions.

27

Market insight on Current e-banking services

9. Retail e-banking services in Palestine
Worth highlighting are the trends in Palestinian retail banking services as a whole. Over the past 3 to 5 years this segment became
a priority for the banking industry where competition can be considered to be the toughest given the detectable trend of diverse retail
banking services offered. The number and benefits of retail banking services compared to previous years has dramatically improved
such as various types of bank accounts, bill paying, and debit and credit facilities. More prominent are personal loans, housing loans,
car loans, promotional prizes and campaigns. Another indicator for this trend is the high frequency and diversity of advertising campaigns for retail clients compared to previous years. Despite the recognition of this segments importance, the interactions through this
survey have demonstrated that banks including leading banks still lack the client relationship management capacities to better serve
their retail clients due to lack of important data necessary for this function.
As for retail e-banking services, most of the operating banks in Palestine provide the Automated Teller Machines (ATMs) which accommodate each banking client separately, while few of the banks have been able to provide banking services through online banking.

9.1 Retail e-banking user profile (based on retail survey outcomes)

The demographics indicators of the respondents linked to the usage of the various e-banking services help us understand the profile
of retail e-banking services users. In effort to facilitate the building of a retail client profile, the below main indicators extracted from the
retail survey outcomes should be taken into consideration by current providers of e-banking services and other providers in the short
and medium term.

The majority retail respondents using e-banking services:

Are ages 25 29 mainly using internet banking

have the educational attainment of bachelors degree with the main service being internet banking

Are employees in the Palestinian authority civil servants with the main service being Visa Electron (not ATM/Visa electron).

28

Have an income between NIS 1,501 2,500 also using Visa Electron (not ATM/Visa electron).

Other indicators worth noting are the 2nd layer of users for e-banking services who:

Are age 30 39 mainly using Visa Electron

Have the educational attainment of Secondary schooling mainly using Visa Electron

Are employees in private companies mainly using internet banking

Have an income between NIS 2,501 3,500 mainly using internet banking.

It can be concluded the main stream users of e-banking services:

Are age 25 39 mainly using internet banking and Visa Electron

Have the educational attainment between Secondary schooling and bachelors degrees

Are employees of public institutions and private companies

Have a monthly income between NIS 1,501 3,500.

* More details on various services and user demographics can be found in the Annex 2

29

9.2 Retail e-banking trends, preferences and factors

As indicated, ATMs is the most common e-banking service, which accounts for the vast bulk of volume. The following sub-sections
provide a description of the main provided e-banking services in the Palestinian banking industry
The customers survey findings show that about 56.2 percent of the customers, use the ATMs machines both ATM cards and or visa
electron cards. ATMs is the most service used by individual clients, other e-banking services is used by small merger of the clients, as
it could be observed in the following table:

94.4

43.9

93.7

91.0
NO
YES

30

5.6

56.1

6.3

9.0

Internet banking
services

ATM machines

Credit cards

Bills payment

9.3 Reflections on Retail e-banking Services: Service description, Usage & Satisfaction of ATM Services
This section presents an in-depth analysis of indicators assessed in the retail clients segment toward ATMs highlights the client trends
in usage, satisfaction levels, key factors influencing their decision and some supply angles related to this service. .
The survey findings indicate that more than 86% of clients had the card since more than one year ago, as it could be in the charts
below:
While 62.5% have had before two years reflecting that e-banking services particularly cash withdrawals as an ATMs service maybe
reaching its maturity state within the current locations while other functions are still in the early phases of introduction. Hence the opportunity for optimal utilization is strongly present for other functions in ATMs.
Less than 1 Years;
13.1
Before 2 Years;
62.5

Before 1-2 Years;

24.4

31

9.3.1 ATM Card Services

i. ATM Cards - Trends in usage
All of the clients who have ATM cards use it for cash withdrawals, while the majority use it to inquire about their account balance, while
the rest of services provided by the ATM is used by small merger of the clients, the survey finding in this regard is summarized in the
following chart:

0.0

94.4

86.8

94.0

94.4

88.4

24.6
NO
YES

100.0
Cash
withdrawal

5.6
Request
cheques

13.2
Deposit

6.0
Charging
mobile

5.6
payment of
bills

11.6
Transfer from
account to
account

75.4
Inquire about
the balance

As mentioned earlier and further demonstrated in the above chart, other types of ATM functions are significantly underutilized, yet
slowly gaining momentum. Reasons could be related to the fact that these services have yet to gain grounds through proactive promotions and awareness building tools.
ii. Frequency of usage for ATM Cards
With respect to the frequency of usage, the survey findings show that at least 30 percent of clients use the ATM machines at least once
weekly, as it could be observed from the following chart:

32

Frequency, (accumulated) ATM

More than once in the week;
9.3
Rarely use it;
13.6

Once a week;
21.2

Less tahan once a month;

4.2

Once a month;
29.2

Once in bi- weeks;

21.2

The above may indicate that the number of transactions via the ATMs is already quite high as such traffic on ATMs may also be high
indicating the need to expand the number and geographical spread to ensure convenient services.
A major misconception validated by the survey was the fact that 51.1 % of the clients think that their banks charge commission on the
ATM usage. This supports the assumption that retail e-banking clients are not well informed of benefits of e-banking services by their
banks staff or material..

33

iii Client satisfaction

A set of indicators were put forth for evaluation of retail clients satisfaction levels from ATMs which reflect the following major points to
be considered as per the corresponding table:

94 agree that ATM machines are easy to use for cash withdrawals

76% agree that ATM is a safe means for withdrawals while comparatively speaking almost 20% agree that it is a safe means for deposit.

Only 33% agree that ATM machines do not stop while 43% believe that ATM are not reliable

Only 56% agree that ATM machines are well spread and easily accessed

In summary, the above reflects that there is still much more room for improvements in ATM services and function utilization.
Details on level of satisfaction from ATM services are summarized in the following table:
Satisfaction indicators

Agree

Neutral

Not agree

Don't try the service

Total

ATM machines do not stop

33.9

21.6

43.6

0.8

100

ATM is safe mean for withdrawals

76.7

15.3

7.6

0.4

100

ATM is safe mean for deposits

20

2.1

8.1

69.8

100

The period of ATM stop for cash replenishment or maintenance is

reasonable

54.7

19.2

22.6

3.4

100

Procedure to get ATM card is easy

75.7

10.6

12.3

1.3

100

it is easy to withdraw cash from ATM machine

94

4.7

0.9

0.4

100

it is easy to deposit cash in the ATM

17.1

1.3

2.5

79.1

100

The ATM machines well spread, and easily accessed

56

16.2

16.7

11.1

100

easy to transfer between accounts

18.8

2.1

4.3

74.7

100

Other services (except withdrawals and deposits) are easily done

45.3

5.6

46.1

100

34

iv. Factors influencing the usage of ATM Cards

From a set of five main indicators influencing their use of ATM and the degree of their importance, the following are the highlights of
the survey as detailed in the below table:

Usability rated number one by 52% of respondents

Availability rated number two by 40% of respondents

Commissions/charges rated number 5 by 62% of respondents

If anything, the above depicts that clients rated user friendliness and availability to be the most important factors while the least
important factor in return for the above benefits is commissions and charges. This means that if the first two were strongly available
then clients are most likely willing to pay for these attributes.
First Importance

Second Importance

Third Importance

Forth Importance

Fifth Importance

Commissions/Charges

15.7

9.3

16.8

55.4

62.5

Availability

20.9

40.9

25.0

9.7

0.0

Usability

52.3

22.8

14.9

13.3

0.0

Safety

8.9

26.5

42.8

21.0

0.0

Other

2.1

0.5

0.5

0.5

37.5

Total

100.0

100.0

100.0

100.0

100.0

The most interesting findings is that safety is considered is a limited concern held by only 8.9 percent, which indicate that customers
are highly feel safe to use the ATMs.
Spread of ATM 15 banks currently provide ATM service, through 240 stations

35

v. Procedures, limitations, and opportunities of ATM

Based on the reported information from the surveyed banks, the following procedures and limitations are present:
Type of measures/procedures

Common Procedures, limitations on ATM

security measures/tools

Watching camera
Pin code controlled by the client
Separation between handling the card and the pin code (different employees handle each one)
Stand by generators for ATMs, special room for ATMs

limitations set on (withdrawals, deposit, Withdrawal limit range from $800 - $1500
transfers)
Limits on transfers from account to account (one bank reported a limit up to $5000)
issuance procedures

the replenishment
monthly frequency

The client must have valid current account

Application is filled and reviewed at branch level and processed at the head office and at first pins are issued
and charges are collected then dispatched to the related branch and second day cards are printed and
afterwards upon receiving branch receipt
procedures

Opportunities and challenges

36

and Special employee accompanied with security guard (2-3 times a month)
For far machines, the replacement cassette is filled with currency in the branch,, then an employee
accompanied with security guard in special car replace the empty cassettes with the new filled out cassettes
Each time the an employee match between total value of transactions with the amount of currency inserted in
the cassettes
once weekly we replenish our ATMs unless was a need for short period and two employees manage the
replenishment process of which is the branch supervisor
lack of needs assessment for updating the electronic banking process
absorbing the new systems, the hackers
maintenance of the electronic systems, to be in use all the times
people still need awareness campaigns usefulness of ATMs and others

9.3.2 Credit Card Services: Service description, Usage & Satisfaction of credit cards Services
This section presents an in-depth analysis of indicators assessed in the retail clients segment toward credit cards, highlights the client
trends in usage, satisfaction levels, key factors influencing their decision and some supply angles related to this service.
i.Credit Card trends in usage
Credit card is a payment instrument with a line of credit. The issuer of the card grants a line of credit to the consumer (or the user). A
credit card is different from a charge card, where a charge card requires the balance to be paid in full each month. In contrast, credit
cards allow the consumers to revolve their balance, at the cost of having interest charged. Level of credit often fixed to a set amount.
Credit interest in general higher than for more standard lines of credit, bank loans etc
The survey findings indicates that only 6.5% of the individual clients have credit cards, 51% of them have got the card since more than
two years, as it could be in the charts below:

Less than 1 Years;

23.5
More than 2 years;
51.0

Before 1-2 Years;

25.5

37

The survey findings show that about 66.6% use the credit card for different purposes while only
33.3%% of persons who have credit cards rarely use it.
58.8% of the clients who have credit cards use it while traveling (outside Palestine), while the rest use it in Palestine. This indicates a
growing trend in the use of credit cards in Palestine and the development of the commercial/retail infrastructure to support this trend.
Also we can say that 63.6% use credit card for cash withdrawal while 36.4% dont.

Other;
11.8
Outside Palestine while travelling;
58.8
Shopping inside Palestine;
58.8

38

ii Frequency of using credit card

With respect to the frequency of usage, the survey findings show that at 14.7luse the credit card more than once a week, while 35%
percent of clients use the credit card at least once a month, as it could be observed from the following chart
More than once in the week;
8.8

Rarely use it;

38.2

Once a week;
5.9

Once in bi- weeks;

11.8

Less tahan once a month;

11.8

Once a month;
23.5

From the above it could be observed that the usage of credit cards is less frequent than the ATM cards, for reasons attributed for the
charges imposed on each transaction. Credit cards are mainly used for business oriented customers who travel, and/or use the cards
for over drafting advantages. We can also assume that ease of obtaining a credit card is directly correlated to low levels of frequency
in use.

39

iii.Client satisfaction
A set of indicators were put forth for evaluation of retail clients satisfaction levels from credit cards which reflect the following major
points to be considered as per the corresponding table:

97% of respondents agree that the bank staff tolerate/understand their queries

Only 61% agree that the fees for issuing the cards are reasonable

26% do not agree that interest is reasonable

Out of the respondents using credit cards, the majority of users are satisfied with respect to the different attributes relevant to the credit
cards.

Satisfaction indicators

Agree

Neutral

Not agree

Don't try the service

Total

Credit Card services (the grace period is reasonable)

85.2

2.9

5.8

5.9

100.0

Interest is reasonable

67.7

2.9

26.5

2.9

100.0

Could be used in many places

88.2

5.9

5.8

0.0

100.0

The replacement of the card is done in easy procedure

76.5

8.8

11.7

2.9

100.0

The bank staff tolerate/understand my queries

97.1

2.9

0.0

0.0

100.0

Fees for issuing the card is reasonable

61.8

17.6

17.7

2.9

100.0

Re-payment installments are reasonable

70.5

8.8

11.8

8.8

100.0

Usage of the credit card is safe

91.1

5.9

2.9

0.0

100.0

40

iv Commissions/interest on credit cards

Interestingly, the survey findings show that only 50% of the clients realize how much the commissions/interests is for using the credit
card while 50% dont know.
v Factors influence usage of credit cards:
From a set of five main indicators influencing their use of Credit Cards and the degree of their importance, the following are the
highlights of the survey as detailed in the below table:

Usability of the credit card was rated number 1 by 47% of respondents

Safety was rated number 2 by 17% of respondents

Commissions and charges was rated number 4 by 42% of respondents

The table below details the factors influencing usage of credit cards with respect to the degree of importance:

First Importance

Second Importance

Third Importance

Forth Importance

Fifth Importance

Commissions/Charges

14.7

3.7

8.0

42.9

15.8

Availability

5.9

29.6

24.0

23.8

10.5

Usability

47.1

33.3

16.0

14.3

10.5

Safety

17.6

22.2

32.0

9.5

26.3

Spread Of POS

14.7

11.1

20.0

9.5

36.8

Total

100

100

100

100

100

41

iv Spread of credit cards

Based on the survey findings, 5 out of 11 surveyed banks, reported that they provide credit card service, while only 4 banks reported
about number of credit cards they manage, the spread of number of cards with respect to region as it clear from the chart below:

4,119

2,242

2,007

573

North WB

42

Center WB

South WB

Gaza Strip

Volume of Credit Card transactions

The estimated total 2008 volume of credit cards transactions for 3 banks (who reported about their transactions) is estimated at
approximately 277,454 transactions. The distribution of the total transaction with respect to the type of transactions is shown in the
following chart:
Volume of Credit Cards in 2008
152,742

84,933

24,872

Total annual volume

(number) of transactions of
cash withdrawal locally

14,907

Total annual volume

Total annual volume
(number) of transactions of
(number) of transactions of
purchases locally
cash withdrawal internationally

Total annual volume

(number) of transactions of
purchases internationally

The total value of the credit cards transactions is estimated at an approximate money value of US$ 48,385,770, To highlight the value
of the total of credit cards transactions, with respect to the type of these transactions based on the reported information from the 3
banks, the following chart summarize the survey findings in this regard:

43

Value of Credit Cards Transactions (Million US$) in 2008

37,60

7,66
1,02
Total annual amount
cash withdrawal locally

Total annual amount

of purchases locally

2,01
Total annual amount
cash withdrawal internationally

Total annual amount

purchases internationally

As it could be observed from the above, withdrawals locally are the most type of transactions that is used by the clients, in the second
rank are international purchases. Another point can be detected from the above chart, that the clients used cards outside the country
for purchases mainly, while they use these cards for cash withdrawals locally.

44

vii Procedures, limitations, and opportunities of CREDIT CARDS:

Opportunities:
Credit cards are considered as bank facilities provided for customers, to enable them to withdrawal cash and purchases worldwide.
The increased spread of point of sale channels in Palestine further presents the opportunity to expand this service. Trends in overall
readiness for retail customers for e-banking services present another opportunity. Finally and given the complexities in travel outside
of Palestine should also pose an additional need within Palestinian society.
Challenges:
The low security of the credit card system presents opportunities for fraud. This has created a huge blak market in stolen credit card
numbers, which are generally used quickly before the cards are reported stolen.
Credit card security relies on the physical security of the plastic card as well as the privacy of the credit card number. Therefore, whenever a person other than the card owner has access to the card or its number, security is potentially compromised since many times
merchants often accept credit card numbers without additional verifications.

45

viii CREDIT CARDS revenues and cost

Credit card revenue relies more on fees, and the table below summarize the different commissions for the surveyed banks:
COMMISSION OF ISSUANCE OF CREDIT CARDS
Classic visa card

Golden visa card

Bank 1

$70

$140

Bank 2

$60

$90

Bank 3

$30

$60

Bank 4

$35

$71

Bank 5

$25

$50

As it could be observed there are no standardized commissions on different types of cards and different banks. This is attributed mainly
to the bargaining power of the banks when negotiate with the international credit cards providers, as economies of scale is considered
in this regard, which may give a positive indicator for issuance of local card linked to international provider, as this can grant the better
terms and charges.

46

The commission and interest on cash withdrawals and purchases using credit cards for the surveyed banks could be summarized in
the table below:
commission and interest of cash withdrawal (using credit cards)
Commission

interest

Bank 1

3.8% /transaction

20% annually

Bank 2

$4% /transaction

1.2% monthly

Bank 3

$4% /transaction

1.67 monthly

commission and interest of purchases using credit card

Commission

interest

Bank 1

20% annually

Bank 2

1.2% monthly

Bank 3

1.67

1.67 monthly

ix Other e-services
In fact the credit card is correlated to many other e-services that may introduced in the international and local markets such as e discount, e-commerce which is an expanding field for applying agent technologies. A related service which should be used as an indicator
on commercial points of sale readiness is the e-Points launched to Palestinian consumers this year. So far it has already attracted
over 100 participating merchants from the leading dining, fashion, gift, service, family circle and foodstuff outlets in the West Bank, and
expects to create a solid clientele base of 30,000 cardholders by the end of this year1.
1 www.ameinfo.com/news/Company_News/E/e-Points

47

9.3.3. Visa Electron Services: Service description, Usage & Satisfaction of Visa Electron
This section presents an in-depth analysis of indicators assessed in the retail clients segment toward Visa Electron, highlights the client
trends in usage, satisfaction levels, key factors influencing their decision and some supply angles related to this service.
Visa electron cards provide mixed services that combine debit and credit services. The difference between Visa Electron and Visa
Debit is that payments with Visa Electron require that all the funds be available at the time of the transfer (i.e., Visa Electron card accounts cannot be overdrawn). As a comparison, Visa cards allow transfers of unavailable funds below a certain limit. As a result, some
online stores and all offline terminals (e.g., onboard trains or planes) do not support Visa Electron because their systems cannot check
for the availability of funds.
Traditional ATM cards are being replaced by Visa electron by leading banks while some banks still provide both types of cards. And the
majority of the banks only provide traditional ATM cards.
The survey findings indicate that 51 percent of clients have visa electron while 69.6% have had the visa electron card for more than
two years as it could be in the charts below:
More than 2 years;
69.2

Less than 1 Years;

7.7

Before 1-2 Years;

23.1

48

i Visa Electron trends in usage

65.4% of the clients who have visa electron cards use it for cash withdrawals, while 7.4% use it to shopping and 14.3% for both. The
survey findings show that about only 13% of persons who have visa electron cards rarely use it.
As it could be shown in the above chart, the VISA Electrons currently used for cash withdrawals or shopping, while other kind of services are significantly underutilized, may be part of the reasons could be referred to the fact that clients are not use or need the other
services, but certainly part of those who do not utilize the other services are either not aware of their existence or lack the knowhow of
using them. Worth noting is that there is a trend in using VISA Electron for International cash withdrawals.

49

ii Frequency of usage for Visa Electron

With respect to the frequency of usage, the survey findings show of those using Visa electron, the overwhelming majority 84% use it
at least once a month, 42% use it more than once a month while 40% use it once a month.
Rarely use it;
11.9

More than once a week;

8.5
Once a week;
10.0

Less than once a month;

4.5
Once in bi- weeks;
24.4

Once a month;
40.8

The above indicates that the monthly usage of VISA electron is consistent and quite high, demonstrating dependability of user on this
service.

50

When asked about the use of Visa electron in another banks ATM machines, responses were:

21% use it in other machines

17% do not use it to avoid commissions

22% do not know that this option is available

37% do not use it for other reasons

No,to avoid additional commissions;
17.4

No,without reasons;
37.8

No,dont know if this is possible;

22.9

Yes;
21.9

This leads us to say that the majority 39% are under the wrong impression and do not fully understand the benefits of Visa Electron in
terms of flexibility in ATMs otherwise they could use this function. While 21% only recognize the benefits and use this function. Finally
37% do not use it for other reasons, could be due to the large spread of their own banks ATMs or low spread of Visa Electron ATMS.

51

iii Clients satisfactions

The most interesting indicator is that only 56% of respondents are satisfied with VISA Electrons interest as being reasonable, while
36% are between neutral and not satisfied.
General satisfaction levels for all other indicators range between 68 82% satisfied. This reflects that there is still much more to be
done in terms of customer satisfaction.
The table bellow shows the level of satisfaction of different variables:

Agree

neutral

not agree

Don>t try the service

Total

Services interest is reasonable

56.0

17.0

18.0

9.0

100.0

Could be used in many places

77.5

10.0

3.5

9.0

100.0

The replacement of the card is done in easy procedure

68.5

5.0

11.0

15.5

100.0

The bank staff tolerate/understand my queries

82.5

7.5

4.5

5.5

100.0

Fees for issuing the card is reasonable

75.0

9.0

7.5

8.5

100.0

The bank provide appropriate orientation on how to use the card

73.4

11.1

14.0

1.5

100.0

iv Factors influencing the usage of VISA ELECTRON

When the clients were asked to select the most important five factors, that positively influence their usage of the VISA ELECTRON,
the majority of 58.6 percent selected usability as number one factor influencing using visa electron. The second factor with 41.9 % is
availability and 38.7 selected safety as third factor and finally the least important factors are commissions / charges and spread in POS
consecutively.

52

The table below summarizes the driving factors for usage:

Commissions/Charges

First Importance

Second Importance

Third Importance

Forth Importance

Fifth Importance

12

9.6

18.7

35.3

24.5

Availability

17.8

41.9

21.9

9.8

6.4

Usability

58.6

19.8

11

13.5

9.6

Safety

7.3

22.2

38.7

32.3

6.4

Spread of sales points when using Visa Electron

4.2

6.6

9.7

9.0

53.2

100.0

100.0

100.0

100.0

100.0

Total

The above reflects that VISA electron is still in the early stage of introduction where many misconceptions need to be altered in terms
of usability. The non-availability factor says a lot in terms of users interest and demand to have this service hence the low levels of
supply in this respect.
Worth reflecting on is the variation in responses amongst different regions in Palestine.
% of clients who selected each factor as one of most three factors influencing their
usage of VISA ELECTRON
Usability
Availability
SOPOS
Safety

All PT (%)
North WB
14.2
19.0
22.7
19.5

3.8
5.7
21.4
5.0

Region
Center WB South WB Gaza
12.1
17.2
16.5
16.5

17.9
18.8
17.1
20.5

21.6
29.9
33.2
32.0

53

v Volume of visa electron cards transactions

Based on the survey findings, 5 banks reported that they provide visa electron card service. 4 banks reported about the size of their
transactions. The estimated total 2008 volume of visa electron transactions for the respondent banks with respect to the detailed type
of transactions are summarized in the following charts

Volume of Visa Electron Transactions

2,969,580

27,066
cash withdrawal locally

54

purchases locally

101,356
cash withdrawal internationally

22,125
purchases internationally

Value of Visa Electron Transactions (Million US$)

801,02

1,11
cash withdrawal locally

purchases locally

1,09
cash withdrawal internationally

0,57
purchases internationally

However, with respect to the number of visa electron cards, 4 banks reported that the total number of active visa electron cards is estimated at 198,011 cards while 40,000 were reported as inactive cards. Only two banks (with 133,942 issued cards) provided information
about the distribution of issued visa electron with respect to region as it clear from the chart below:

55

Distribution of Visa Electron by Region

41,942
36,545

34,621

20,834

North WB

Center WB

South WB

Gaza Strip

It worth observing that, the Visa electron follows the same pattern of the ATMs cards distribution, where the northern region of west
bank is the highest region with respect to the number of cards.
The volume of the visa electron transactions on the level of the 3 surveyed banks was approximately 2,969,580 of locally cash withdrawals valued at an approximate value of US$ 801,020,000. This leads to the conclusion that the VISA ELECTRON CARDS are
used widely in the local market yet still to be exploited in international usage. Possibly there needs to be more awareness building
campaigns on the values present internationally.

56

vi Procedures, limitations, and opportunities of VISA ELECTRON CARDS:

Opportunities:
The main opportunity is the increasing need of such service to be used in cash withdrawal and purchases from point of sales.
Highlighting the flexibility in terms of the number
Challenges:
The low security of the visa electron card system presents opportunities for fraud.
Visa electron card security relies on the physical security of the plastic card as well as the privacy of the visa electron card number.
Therefore, whenever a person other than the card owner has access to the card or its number, security is potentially compromised.
Merchants often accept visa electron card numbers without additional verification for mail order purchases.
vii Visa electron cards revenues and cost
Visa electron card revenue relies more on FX transactions, and the table below summarize the different commissions charged from
the Arab bank:

interest

commission

Commission/charges of using Visa Electron card in cash withdrawals Internationally (equivalent to US$)

0.05%

$2.75

Commission/charges of using Visa Electron card in cash withdrawals using other bank ATM (equivalent to US$)

0.05%

$2.75

It is worth mentioning that withdrawals using visa electron from an ATM machine of other bank is considered as international
transaction

57

To indicate the increase of number and volume of visa electron transactions is the potential growth of FX transactions as summarized
with the below table:
Example on usage of ATM cards (which include FX transactions)
Visa Electron
Year

Number of transactions

Value USD

2006

106,121

13,283,982

2007

107,548

12,664,774

2008

110,614

17,969,343

This table is developed based on data was provided only by one bank

9.3.4. On-line Banking: Service description, Usage & Satisfaction On-Line Banking
This section presents an in-depth analysis of indicators assessed in the retail clients segment toward on-line banking, highlights the
client trends in usage, satisfaction levels, key factors influencing their decision and some supply angles related to this service.
The findings show that only 7.6% of the surveyed clients use Internet banking, while the rest do not use Internet banking services for
various reasons that will be demonstrated in the upcoming sections. As expected, this is the least used form of electronic banking
services due to its recent introduction which is in-line with trends all over the world.
However, positive signs of IT diffusion within the surveyed segment reflect the likelihood of increased demand for on-line banking.
Particularly, survey findings indicate that 71.4% of clients do have computers and 52% do have internet accessibility at home, among
them 34.6 have internet in work place. As shown in the table below:

58

Do you use Internet banking services (count of respondents)

Yes
Do you have Internet subscription at home

Total

No

Yes

39

369

408

No

372

377

44

741

785

Total

Furthermore the correlation of IT diffusion and users of online banking is clearly validated as 88.6% who do use Internet banking also
have internet subscription.

i Client satisfaction
The majority of those using online banking 72% are satisfied. Which indicate that the on line banking prove to be acceptable and satisfactory by the clients, which may encourage the possibilities of increasing the client base of the internet banking services.
The table bellow shows the level of satisfaction of different variables:

Agree

Neutral

Do not agree

Total

How do you evaluate the Internet banking services (easy)

75.5

19.3

5.3

100.0

How do you evaluate the Internet banking services (fast)

75.9

12.1

12.1

100.0

How do you evaluate the Internet banking services (secure process)

55.2

24.1

20.7

100.0

How do you evaluate the Internet banking services (Accessible any time)

82.2

10.7

7.2

100.0

59

ii Factors influencing the usage of INTERNET BANKING

As for reasons of those who do not use online banking, survy results demonstrate that 40% do not use the internet in general while
33% use internet yet are not aware of their bank offering this service, only 8% are not sure if they will would use online banking. This is
a positive situation reflecting that of those having internet the majority 33% will use online banking if offered by their banks versus the
minority of 8%. In summary, it is expected that online banking will increase significantly in the short term.

Do not use internet in general

40.2%

use the net, but does not know if the bank offers this service, but in the case he knows, he would use the Internet banking

33.3%

He/she use the net, but does not know if the bank offers this service, but in the case he knows, he would not use the Internet banking 8.7%
knows about the service, but never use it

60

17.8%

iii E-billing:
As part of on line banking services, the survey findings show that the overwhelming majority of clients still use traditional payment methods way as it shown on the chart:

14.3

84.9

99.4

99.0

88.4

99.4

98.7
NO
YES

85.7

15.1

On counter of On the bank

providing comcounter
pany

0.6
Throughthe
internet

1.0
By phone
banking

11.6

1.0

1.3

Using direct Using debit card Using ATM

bank debit or visa electron

As it could be observed a neglectable merger of the clients are using the e billing approach. However, when the clients were asked
about the preferred way in the future to pay bills it was found that about one fifth of the clients indicated to the electronic methods such
as internet banking, phone banking, ATMs. As it is shown in the chart:

61

Using debit card or visa electron;

2.4
Using ATM;
2.6

Using direct bank debit;

22.7

By phone banking;
1.4
On counter of providing company;
37.8

Throughthe internet;
14

On the bank counter;

19.1

62

10. Reflections on Corporate E-banking Services

The Palestinian Bureau of Statistics reported that the total number of operating establishments in the West Bank and Gaza Strip in
2007 is 116,804, distributed as 82,871 in the West Bank and 33,933 in Gaza Strip. In 5 years (2003-2007) the number of establishments
increased by 65%, as it could be observed in the following chart:

70701

87828

90448

89858

116,804

2003

2004

2005

2006

2007

Taking in consideration that 95% of private companies are small in size and family based ownership and management, a certain small
number of establishments have yet to open bank accounts. Even though it is believed that this segment is very small and the majority
of the establishments conduct the bulk of their financial transactions through banks to manage their various operational processes.

63

10.1. Trends in Corporate IT diffusion

With the increasing adaptation of the corporate entities to the use of technology in their daily operations financial and other, it is expected that there will be ever increasing trends to use on line banking services, as it is very efficient and fast means, and it reduces the
cost of handling the required bank for the corporate operations.
The PCBS IT survey indicated that almost one fifth of all Palestinian establishments use the computers in their operations (considering
that more than 95% of Palestinian establishments are small SMEs), where the overwhelming majority of the service establishments
use the computer in their operations, as it could be observed in the following chart:
83%

43%

16%

0-4 employees

5-9 employees

10 and mor

As it could be observed from the above, the larger establishments tend to be more IT oriented in comparison to smaller ones. For those
organizations that have computers, the vast majority of them use internet as the following chart summarize:

64

35%

31%

18%

70701

87828

90448

65%

69%

82%

0-4 employees

5-9 employees

10 and mor

The above may give a general indication on the extensive use of internet in corporate usage particularly that the difference in internet
access is not limited to large size companies and is more or less the same between small and medium size companies.

65

10.2 Corporate usage o f e-banking

The study team conducted a judgment sample of 42 leading big establishments to reflect their perception regarding different aspects
of e banking services.
As expected, corporate needs from e-banking services vary widely from retail needs. Corporate companies and institutions are more
prone to use online banking, e-billing, direct debit payment, and company credit card as part of the motive for efficiency, effectiveness
and documentation purposes in running their operations. In the upcoming sections, the various e-banking services will be presented
briefly in terms of their current use, trends and reasons for not using e-banking services.

66

i Corporate Credit Cards

The findings of the surveyed establishments show that 31.7 percent do have corporate credit cards while the rest dont, also it was
found that 69.2 % of the companies that have credit cards had them for more than two years as it shown in chart below:

Period for Credit Card Holders (% of Companies)

Before 1- 2 Years;
23.1

Less than 1 Years;

7.7

More than Years;

69.2

It was found that 73.8% of companies who have credit cards are satisfied from this product. Interestingly, the survey shows that 58.3%
of the surveyed establishments are willing to use local credit card despite the major use being international travel.

67

ii Online banking
The survey findings of a selected big leading corporate show that 73.2% of the big surveyed companies use on-line banking as shown
in the following chart:

No;
26.8

Yes;
73.2

68

The findings show that about 73% of those using online banking use it for balance inquiry and bank statements and to a much lesser
degree for intra accounts fund transfer
Reasons for not using online banking by other companies are summarized accordingly:

To avoid mistakes.

For financial reasons.

The limit of internet is not enough.

Many banks doesnt provide this service

The company policy uses the traditional way to deal with banks.

Lake of promotional campaigns

The banks branches are spread and not far from companies.

For those who use the on line banking services, the findings show that 81% are satisfied, and 63.3% consider it better than physically
visiting banks.
The survey findings prove that, once the companies realize the merits of on line banking, they will be highly satisfied as the current
practitioners indicated about their experience. This could be a further indicator on the role that may be done by the proposed intermediary banking Services Company.

69

Special considerations
This section handles important information received during the Banks survey yet it is not reflective of the whole banking industry or client base.
More specifically, the upcoming information covers volume of on-line banking foreign exchange transactions and e-billing provided by one bank.
The table below demonstrates the potential growth of FX transaction via internet given the trend over the three year period:
Year

Internet Banking
Number of transaction

Total Value USD$

2006

4,739

11,084,472

2007

5,619

12,363,073

2008

7,353

16,318,540

The number of transactions increased by 55%, and the value increased by 47%,, which indicates yet another trend in growth for internet
banking.
iii E-Payment & E-Billing
The study shows that 2 banks out of the 11 surveyed banks provide Electronic Bill Presentment and Payment EBPP in addition to 9
banks out of 11 who provide direct debit service.
There are several services for electronic billing and payment, yet for purposes of this study Electronic Bill Presentment and Payment
and the 2nd is direct debit will be the focus. EBPP is mainly driven by utilities companies due to the efficiency in cash flows provided
and the lower transaction cost related to non-payment by their clients from having their bills paid on time by households, corporate
companies and other institutions.
EBPP is the process by which companies bill clients (bill presentment) and the bank has prior authorization to transfer payments electronically. EBPP involves the billing company and the paying client in a financial transaction cycle and should not be confused with
direct debit payment through online banking. EBPP should also not be confused with Electronic Funds Transfer, commonly known as

70

EFT. Jawwal, Paltel, and electricity are the main companies using Electronic Bill Presentment and Payment
Several surveys have indicated that a percentage of consumers inclined to use EBPP often times do not know which utility or company
offers this service, or how to get started with EBPP.
This service is could be of high level importance by corporate clients more than retail client due to its positive impact on efficiency in
operations for the corporate company to ensure all utility bills are paid on time and avoid work disruption as a result of utilities being
cut out. Additionally to minimize physical presence and time required to conduct regular bill payment rituals which could take up more
than an hour every month. While none of the billing companies charge a fee for using this service.
iv Direct Debit payment
Direct debit on the other hand entails the client making payment without the bill presentment to the bank. The client requests/authorizes payment to the intended company through internet banking or other channels such as mobile phone or credit card. Many utilities
companies in Palestine offer this service through coordination with banks. Paltel and Jawwal offers direct debit with discount to encourage people to use it and paying bills via phone tones and via internet using credit and debit cards.2
JDECO (Electricity Company) offers direct debit, but on the other hand its strategy is to convert all customers to use prepaid cards and
that clear enough from statistics obtained from the company:
Number of customers

Number of customers who use direct debit

Number of customers who use prepaid

265,000

2,421

20,000

Source: JDECO not published data 11-2007

Also JDECO simplify paying by offering paying bills on its counters by using credit and debit cards.3

http://www.paltelgroup.ps english/index.php.2006

http:www.jdeco.net/2005

71

Based on the reported data from 7 banks, the chart below shows the potential growth of using direct debit for paying Paltel bills:
Potential Growth of Using Direct Debit for Paying Paltel Bills

48,349

34,356

19,987

2006

72

2007

2008

Based on the reported data from 4 banks, the chart below shows the potential growth of using direct debit for paying Jawwal bills
Potential Growth of Using Direct Debit for Paying Jawwal Bills
1,113

755
507

2006

2007

2008

Based on the data obtained from Arab bank, the table below summarizes total number of bills paid for Paltel and Jawwal through internet banking
Total Number of E-billing transactions using Internet
Item

2006

2007

2008

Paltel

409

666

1,054

Jawwal

375

369

494

As it could be observed the usage of e payment through internet banking is ever increasing over years particularly since these figures
represent only one bank while 9 other banks also provide this service yet we do not have their figures.

73

Market demand as driving force for Investment

11. The Appropriate business model for E-banking service in Palestine
In previous sections, developments in international trends for e-banking services business models were presented along with the key
variables impacting each phase of development of the business model and the corresponding benefits to the end users of e-banking
services.
In this section, the first and third models will not be considered as options for analysis for several reasons. The first business model
is already the base line as the current business model for e-banking services in Palestinian. Furthermore, the extensive analysis of
this model as the baseline for this study provides extensive market insight to from the e-banking client surveys to be considered as a
solid foundation for better marketing of e-banking services. Namely retail banking demographic profiles, clients current usage trends,
satisfaction levels and factors driving future usage for ATM, POS, VISA electron and online banking, can be considered more than
sufficient to guide the independent development of in-house e-banking services by Palestinian banks. Details of these indicators are
in the market insight on current e-banking services section.
The more appropriate model based on historical, commercial and business sense comparing to level of development in the Palestinian
market is the joint intermediary banking Services Company. In this section we will reflect upon the 2nd business model of intermediary
banking services company and in relation to the outcomes of this demand assessment study due to its compliance with market infrastructure, trends and preferences.
Other benefits from an intermediary banking Services Company and or enhancements in the business model for e- banking services,
banks will:
The proposed companys client banks will be benefit from:

offering a diverse product mix of e-banking services to their own individual and corporate clients

An Increase in the volume of transactions due to intra-banking relations managed by the company

74

Higher level of their own customer satisfaction due to the benefits enjoyed from intra-banking cooperation such as lower fees, wider geographic coverage, and standardization in e-banking channels interfaces.

technological infra structure to integrate in global markets,

optimal banking operations

Upcoming is a projection of revenue of the second business model along with the various assumptions considered.

12. Summary of Potential revenue / Income forecast for the proposed company
For purposes of estimating the potential revenue stream of the proposed intermediary banking Service Company, the following are the
underlying basic assumptions in addition to those detailed for each e-banking service in annex 3:

Value added services and perceived benefits from client banks to by banking clients made possible through the banking services intermediary company will allow leverage for fair charges/commissions yet:

Charged commissions should be either a percentage of the cost reduction of the bank transaction or

a reasonable commission from customers

No increase the overheads associated with the banking transactions as a result of transferring various e banking services through the
virtual platform of the proposed company.

Banks will see value integrating the e banking services through the proposed company as such will work with the said company. As the
company will be able to offer its client banks more services and increased volume of transactions. Make it more efficient by improving synergy and utilization rates of various channels, which will lead to reduced cost and increase the profitability of the banks.

Worst case scenario assumed for costs: International costs rates are considered as benchmarks in (income) estimations for the proposed
company.

75

Revenues that can be generated from the e-banking services are depicted in the following section while details are also present in annex 3.
The research team realizes that these calculations are based on assumptions developed according to some comparisons with international bench marks, and educated guess. However, the exact figures that can be more reliable and could be easily obtained once the
banks and investors became interested to cooperate in establishing the proposed company.
The purpose of the above estimated revenues and assumptions, was to give a tentative potentials for establishing an intermediary
company that integrate the provision of the e banking services among the banks.
Based on the detailed assumptions and conclusions detailed in annex 3 Revenue and income assumptions, the following table summarizes the potential revenue that can be generated from the proposed company:
Type of e-banking services

units

Number of units

Potential revenue (US$)

transaction

3,515,116

351,110

cards

4,957,6054

5,000,000

Credit cards

cards

233,795

5,000,000

On-line banking

transaction

3,000,000

1,500,000

ATM

Others5

500,000

Total

12,351,110

We must underline that the above estimates are mere indications only as all of it is based on the assumption that the intended company
can share with the Banks the amount of reduced costs as a result of adapting the e banking services. However, these figures will be
more realistic, once the banks accept the idea of the intended company then a reasonable transaction volume forecast can be established based on investment size and the corresponding service capacity, in addition to anchoring the potential commissions/ margins
that can be charged from the company.
4

Including visa electron cards that provides among other the traditional ATM cards services.

Such as FX, discount cards, e points,,,, etc.

76

13. Conclusions and recommendations

13.1. Market demand for wider scope of services and growth trends
From the survey it must be regarded as fully confirmed that there is an interest for a wider scope of electronic banking services by the
retail segment and inclinations by the corporate segment. .
As also indicated from studies in other expanding markets, an expanded scope of services by itself drives transaction volume as well
as the interest for accepting new electronic based services instead of cash based.
The survey findings show that, there was a clear trend for increased transaction volumes in all three areas. A wider presence of ATMs,
more EFTPOS and more service packages through electronic banking clearly confirms that availability and usability also act as a driving factor for transaction volumes.
Based on the reported data from PMA, over 3 years, the usage of cards has increased significantly, which indicate to the strong upward
trends toward the usage of e channels, as it could be observed in the following chart, that indicate to the growth rates:

77

Number of cards growth between 2007, 2008

313992

249689

2007

78

2008

13.2 National system for IBAN, International Bank Account Number system, through an automated clearing house is essential for
growth in electronic payments

In order to facilitate an increase in use of electronic banking, in this case, electronic payments, a fully introduced system like IBAN is
essential to allow all users an easy access.
A system like IBAN will facilitate even the smallest company to easily receive their payments through electronic banking solutions.
A growth in that respect will automatically also drive usage from a customer perspective.
The high penetration of internet bank users in for instance Sweden is to a large extent believed to be the effect of the Swedish equivalent to IBAN used since many years on the local market, bank giro or post giro

13. 3 Growth in new users strongly linked to product availability

From our client survey, it is obvious that availability and user friendliness are the dominant factors to drive transaction volume in the
eyes of the retail clients, which clearly enhance the possibility, that a company which make the service available and user friendly, will
attract significant numbers of new clients in addition to increase frequency of use by existing clients.
From most replies it was apparent that pricing was not an issue. This appears in most studies, pricing is seldom or never given as a
hindering factor for use or acceptance of new services.
We can though assume that pricing, even if not an issue initially, will be a strong competitive factor over time.
One experience from for instance the Swedish Market is that a tactical pricing on over counter payments or any other manual payments
will act as a deterrent for maintaining present system and will act as an additional driving force for adopting any new service offered.

13.4 Summary of driving factors for transaction growth

As pointed out there are several factors that by its self and combined support growth and transaction volume. The study shows a
number of factors that on its own as well in combination will drive usage and frequency.
The most dominant factors apparent in our study were as follows:

79

Availability, easy to access, easy to obtain, easy to maintain

It exists, the sheer fact that the service exists

Easy accessible, through many outlets, your home computer, at your work place

Convenient, at your leisure, no queuing, no waiting

Pricing, cost-effective, customer expectations and their own assessment

24 hours over 7 days, services always available when you need it.

13. 5 Investment opportunity is confirmed yet all-inclusive financial feasibility needs closer review
In view of the findings as presented above additional investment opportunities linked to market growth potential and expected returns
from the establishment of a national system for ATMs, EFTPOS, cards and electronic payments must be considered fully confirmed.
The quantitative material cannot support an absolute conclusion on expected revenue nor in terms of cost, hence returns on investments for expanded electronic banking services, are still to be determined. While all findings, and international comparisons, indicate
a clear trend in growth volume potential; which should be a sufficient indicator to instigate a positive investment decision towards expanded services due to historically demonstrated positive returns.

14. Next steps on the issue of proposed company and expanded services
The study clearly demonstrates that investment in e-banking services in general and in the joint intermediary banking Services Company in particular should offer a number of direct and indirect advantages for the Banking sector, its customers as well as the state of
Palestine. It is recognized and highly prioritized that the PMA must lead and adopt the needed legal and regulatory to facilitate the
expansion of electronic banking services in general and the framework for the proposed intermediary banking services in particular.
In order to start the actual process for implementation, several prerequisites must be present which are reliant on external stakeholders
intents:

80

Presence of a committed group of investors with a clear ownership structure

Acceptance of the PMA for the proposed ownership structure

Once the above is in place, the next natural steps and recommendation are reliant on the path chosen by the committed parties yet
can be defined in broad terms as follows:
1- Establish a complete business plan with the final objective of a full operation.

Total time plan including tollgates

Assess cost involved, project budget

Company governance and registration requirements

Organizational structure

Appoint steering groups, project teams, work groups etc.

2- Some specific areas for the forthcoming project work

Rules and regulations on draft level concerning legal aspects, oversight methods and conditions for service rendered

definition of intended services

stakeholders roles and requirements in relation to a separate service provider

software specification

hardware specification

full cost calculation on soft and hardware

operating expenses

81

define product, in detail and per category

cost structure on transaction, per product

assumed revenue potential, initially and over time

3- Actual start of intended services

4- Develop, plan and execute a marketing strategy, from the perspective of selected provider, for the increased use of intended services.

82

Enclosure 1 - General Guidelines for improved marketing of electronic banking services through current investments inhouse solution
Given the outcomes of the study and the expected time frame for the proposed transformation to materialize in the medium term two to
three years, the study team put forth the below general guidelines to assist Palestinian banks in better marketing the current e-banking
services offered independently. Banks that have already invested in e-banking services need to make a clear policy decision to transform their clients toward e-banking services within a specified time frame in order to truly harvest the returns from decreasing over the
counter operating cost by increasing utilization of full functionality e-banking services. Toward that end, banks could temporarily shift
human resources toward improved marketing of e-banking services and once the shift is successfully achieved to return these human
resources in the area of customer relationship management.
The following are some guidelines:

To expand the use and frequency of use of already present functions. Since there are still many underutilized functions in various services
(namely non-cash withdrawal functions in ATMs, non-account information functions in online banking, and more use of credit and debit
cards locally)

To Train and test employees on the full functions and benefits of e-banking services offered by the said bank (ATM, POS, Credit/Debit
Cards, online banking, e-payments in order to better communicate these to banking clients.

To assign an employee to verbally communicate and physically introduce and assist clients on how to use ATMs full functions and other
e-banking services, this could be done through one on one assistance and actual demonstration of conducting possible transactions via
electronic means during holiday seasons and times of extensive load on tellers. This could be done in rotating employees to ensure full
exposure.

To adopt incentive schemes (price or promotion) in order to expedite transformation of electronic banking services by retail and corporate
clients; decrease use of physical handling over the counter. Similar to what some utility companies are already doing in providing discounts,

83

Banks should focus on the benefits of the corporate segment and design specialized services for corporate e-banking functions related to
e-payment, e-billing and on-line banking to include utility companies.

To advocate the related PA to postulate a strategy to adopt paying governmental fees electronically

While on a different note, and based on interactions with banks and their clients during the surveys, several recommendations should
be taken into consideration by banks which are linked to the overall marketing capacities present in banks. Below are some suggestions:

Banks must profile their client base according to market segments in order to better serve their needs, retail and corporate. This profiling
must be part of the client relationship management system (software) to facilitate positive interaction between bank CRM staff and clients.

The proposed profiling should be the basis to develop new banking services and or enhance existing ones according to differing needs
between corporate and retail clients.

Corporate segment is underestimated, this segment has high potentials yet the nature of services and interactions must accommodate the
values sought by this segment, being efficiency of conducting banking transactions and effectiveness in capturing business opportunities.

The above are partly as a result of this study outcomes in addition to recommendations of another study conducted by a banker from
Palestine about the usage of e-banking services and e-billing.

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Annex 1 - Study Approach & Methodology

The study began with a comprehensive review of literature on e-banking channels and similar e-banking services studies. The literature review informed the design of the survey questions and provided a referential framework for the study. Then the study team held
meetings and discussions with different parties to fine tune the study objectives which provided the initial framework for the study, the
study team preceded with the following points that summarizes the process through which the study was conducted, as well as the data
quality assurance mechanisms used throughout the study:

Tools Design: The study tools including checklists and questionnaires were designed in a participatory manner with the participation of the
international and local consultants team and with key stakeholders from The Association of Banks, International Business Forum (PIBF),
and Palestinian Monitory Authority.

Based on the literature review, A comprehensive questionnaire forms have been prepared, for obtaining the detailed information from the
banks, a questionnaire for surveying a representative sample of banks clients, a questionnaire for interviewing a judgment sample of corporate clients, beside a checklist format for collecting data from the utility companies.

The banks questionnaires were distributed through ABP on 19 banks, to be filled out from different banks departments, out of which 11
banks were filled the questionnaires partially, and sent them back.

The utilities companies were asked to provide data on their current client base and the segmentation of their clients with respect to their
payment methods.

A sample of all banks clients were interviewed to fill out a structured questionnaire that include detailed questions covering their awareness,
practice, attitudes and satisfaction of different e banking relevant dimensions. The following points summarize the approach followed in
designing and implementing the survey:
Training of Data Collectors and Field Supervisors: Data collectors and survey supervisors were mobilized in a manner that ensures
geographic coverage of target banks branches. Field data collectors were assigned to the various branches in different districts of the
West Bank and Gaza in accordance with the sample size in each region. Data collectors were trained on data collection techniques by
the survey team. This training was done through training workshops (in WB and Gaza).

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 A Pilot survey was conducted to identify any potential problems in the field once the full survey is deployed. This pilot survey was directly
supervised by the study team. Problems were identified through this pilot survey, and accordingly a second version of the questionnaire
was prepared.
Data collection: Each data collector was assigned specific branches and time schedule for conducting data collection. Completed questionnaires were submitted to the main office to be reviewed and sent to data entry.
Editing and Coding: The questionnaires were edited using the same instructions adopted for editing. Then some questions were coded
according to pre-designed coding system.

Data Entry and Results Analysis: questionnaire data was entered into the computer, using a data entry template (ACCESS database). A
thorough analysis of the gathered data and information was conducted to arrive at findings and conclusions that answered the questions
and issues determined in the survey objectives. The analysis included a quantitative analysis using SPSS software which provided totals
and percentages by categories gender, age groups, income level, regions, education, etc.

Quantitative Assessments: Expert Feedback Session: A feedback session (or in-depth interviews) was organized to present and discuss
the findings of the survey findings and to draw final conclusions for the proposed company idea. Participants comprised the design team,
representatives from banks senior management, banking industry experts,.

Statistical material collected through the use of questionnaires

Questionnaires used for both banks and clients
Two different sets of questionnaires has been used, one for client level and one for responding banks.
The questionnaires for client level focused largely at customer behavior and use of existing services related to ATM, cards and electronic banking. Another focus looked at driving factors for transaction volume.
At bank level the questionnaires mainly focused at current transaction volume, customer profiles and existing services related to ATM,
cards and electronic banking.

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Survey at client level concerned a large number of individuals

Client level survey consisted of 790 questionnaires. With an approach of direct interviews the response rate was consequently in practice 100%.
The cooperation from our respondents seemed high with a sincere interest in the issues raised.
Overall impression was indeed positive. 42 corporate clients were interviewed

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Annex 2: Retail users profiles

Age

Percent
Internet

ATM/Visa electron

ATM

Visa electron

18-24

13.3

13.1

15.7

25-29

23.3

20.2

30-34

16.7

18.9

35-39

21.7

40-44

Credit cards

Avg. total e-banking services

10.3

3.9

11

17.8

22

21.6

21

18.6

20.7

9.8

17

15.6

16.1

14.2

19.6

17

15

11.3

11.9

10.3

11.8

12

45-49

1.7

8.4

8.1

7.8

7.8

50 and above

8.3

12.4

11.9

14.7

25.5

15

Educational Level

Percent
Internet

ATM/Visa electron

ATM

Visa electron

Credit cards

Aggregate score all e-banking services

Illiterate/can read and write

0.4

0.4

Primary

1.7

3.1

2.5

2.6

11.8

Preparatory

6.7

11.6

10.6

10.3

5.9

Secondary

20

27.3

22.9

31.5

31.4

27

Intermediate Diploma

10

11.8

10.6

11.2

7.8

10

BA

50

38.2

43.6

36.6

37.3

41

High Diploma and above

11.7

7.6

9.7

7.3

5.9

Total

100

100

100

100

100

100

88

Main occupation

Percent
Internet

ATM/Visa electron

ATM

Visa electron

Credit cards

Avg. total e-banking services

Farmer

0.7

0.4

0.9

3.9

Laborer

1.7

1.3

0.4

0.9

PA employee

31.7

52.1

49.4

53.4

25.5

42

NGO employee

2.9

3.8

2.6

5.9

Private sector employee

28.3

17.1

20.9

15.1

13.7

19

Own Business

26.7

14.3

11.5

16.4

43.1

22

Outside the labor force (old age, retired, chronically ill,

5.1

6.4

5.6

3.9

Housewife

3.6

3.8

2.6

Other

6.7

2.9

3.4

2.6

Total

100

100

100

100

100

100

Percent

Income Group (NIS)

Internet

ATM/Visa electron

ATM

Visa electron

Credit cards

Avg. total e-banking services

Less than 1500

1.7

8.7

6.4

9.5

1501-2500

25

35.6

32.2

37.9

27.5

32

2501-3500

30

25.8

26.3

24.6

25.5

26

3501-4500

15

11.8

14

8.6

9.8

12

4501-6000

10

9.8

11.4

10.3

9.8

10

6001-8000

8.3

4.7

5.9

4.3

13.7

More than 8000

10

3.8

3.8

4.7

11.8

Total

100

100

100

100

100

100

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Annex 3 Revenue and income assumptions

Income from ATM
Assuming that synergy provided by the proposed company will lead to further cut in the cost of transaction through the ATM to be at
level of 15 cent4. Based on this about 10 cents per transaction can be charged from the banks for the benefit of the proposed company,
the current annual number of ATM transactions according to the PMA is about 3,515,116 which may lead to conclude that the potential
annual revenue for the proposed company could reach $351,110.
Another scenario for the potential revenue for the proposed company could be based on the assumption that 20 cents (that is currently
charged monthly per ATM card by banks) will be shared on the bases of 50%-50% between banks and the proposed company.
We have 4,957,605 (ATM/Visa electron), this means the fixed gross revenue on the usage of ATM for the company is estimated to be
around $495,760 monthly ($5 million annually). It is completely understood that this revenue will be shared between the banks and the
proposed company. But the existence of the company which will increase the availability and usability will provide the ground to charge
a little bit more for the value added, and to increase the number of cards.
With respect to the cost of the ATM operations, only one bank Aqsa Bank reported that the cost allocated for ATM was $2500 per
ATM/year).
Income from Credit Cards
The range between the lowest and highest rates on classic cards is $45 which means in case one company provides the credit card
through integrating between the banks it can at most add a profit margin up to $45. Considering that currently there are about 233,795
credit cards, so theoretically, the maximum additional revenue that can be obtained by the proposed company $10,520,775. This figure
can be revised based on the internal diagnosis of the banks operations and credit cards systems.
This figure can be revised based on the internal diagnosis of the banks operations and credit cards systems. But the aim of providing
such figures is to indicate to the economic potentials that may be attained through the economies which could be attained by the
establishment of the proposed company. Assuming this additional return will be shared with the banks (50%-50%), so the proposed
company could generate about $5 million annually.
6

This assumption is reasonable, since the spread of ATMs will be utilized better as each single ATM will provide services for the clients of all banks.

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As it could be observed in a previous section, the range between the charges on credit cards obtained by different banks is very high,
which reflect different options/advantages on the one hand, and reflects the various bargaining power between the banks and the international suppliers of credit cards on the other hand.
Local issuing under a joint umbrella might hold several different advantages further to a direct cost benefit.
Income from Visa electron cards
As indicated before, the visa electron has mixed nature, so the generated income will be based on the credit/debit services. In previous
sections we indicated to the revenues of ATM cards, in which we included as well the numbers of visa cards. On the other hand the
potential income that can be generated as a result of interest rates or the commissions that can be charged from the credit services is
reflected to some degree in the credit card potential income.
The below table shows the summarize number and value of FX transactions using Arab Bank ATMs only:
Example on usage of ATM cards (which include FX transactions)
Year

Visa Electron
Number of transactions

Value USD

2006

106,121

13,283,982

2007

107,548

12,664,774

2008

110,614

17,969,343

As it could be observed in the above table, the number of transactions increased by 5%, while the value increased by 35%, which may
indicate that the total value increase result from the increase in the number of transactions and the value of these transactions grew
significantly. This go in line with the total trend observed in this study, that all e channels are up ward increasing.
It is worth to indicate in this regard, that the generated margins from the banks are calculated on the total value, regardless of number
of transactions.

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Income from on line banking

Use of technology should, among others, lead to reduction in transaction costs to banks. In these circumstances, the banks has a
responsibility to ensure willingness to provide user friendly on line banking services, for which the proposed company could be the
vehicles of such promising services.
As indicated in a previous section, the research in USA banking industry proved that using a teller costs banks as much as $2.93 while
on line services costs not more than few cents per transactions. Based on this shifting to use on line banking will provide a net gain for
banks by more than $2.5 per transactions, which means a significant profitability to change towards the on line banking services.
Present charge structure on client level in Europe for internet banking (Sweden) today varies greatly. As an indication charges per
annum, private client amounts to approximately USD 15 and for corporate clients to around USD 200.
No accurate data is available regarding the exact number of bank transactions, however the PMA reported the following number of
transactions for selected types operations in the year 2008.
Type of Transactions

)Number of transaction (2008

Outward remittances

137,483

Inward remittances

203,927

Cheques

2,648,533

Source: PMA, fact sheets, 2008

Assuming that 50% of the reported transactions will be implemented through internet banking within 1-3 years of the launching of the
proposed company. Since the banks will gain around $2.5 per transaction shifted to internet banking, it is assumed that the proposed
company can charge banks, in trade off providing national internet banking solutions, a rate of $0.5 per transaction. Based on these
assumptions, the internet banking can generate revenue of equivalent to about $750,0007.
A development of internet access in line with international trends present and historic is assumed to increase above indications manifolds.
This figure is based on assumptions that can be changed based on the IT hard and software required infrastructure, and the banks calculations, but for the purpose of giving preliminary indicators we developed the above assumptions built on the customer survey outcomes.
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