at a rate seldom seen in other industries. when reducing costs instead of building up new operations, it is imperative to outsource all such activities where there are more efficient service providers available. information technology and payment processing in particular is just such an example. it is here where the benefits of scale can be brought on. according to a bank of finland study of a few years ago, doubling the scale of payment processing activities brings down the average unit cost of transactions by almost 60 per cent. 3 outsourcing has implications for competition and competitive strategy. the more common systems there are in use, the less important role these systems have in terms of mutual competition. we have seen how it infrastructure and payment processing have become increasingly commoditised and outsourced and the importance of these scale - intensive activities for competitive strategies diminishes. illustrative examples include the dutch ideal online payment – solution, which is jointly used by several major banks in the netherlands, and crosskey solutions, which has provided a retail banking solution to several rather small and recently established nordic banks. tarkka, juha : approaches to deposit pricing, a study in the determination of deposit interest rates and bank service charges ; bank of finland studies e : 2, helsinki 1995. kauko, karlo : pankkien kustannustehokkuus : havaintoja suomesta ( bank cost efficiency ; observations with finnish data, available in finnish ) bank of finland financial markets department working paper 1 / 2006 morttinen, leena : rahoitusjarjestelman vakaus ja tehokkuuden mittaaminen ; ( financial stability and measuring of efficiency, available in finnish ) bank of finland financial markets department working paper 1 / 2006. khiaonarong, tanai, payment systems efficiency, policy approaches, and the role of the central bank. bank of finland discussion papers 1 / 2003. banks can better refocus on other things : collecting and acquiring customer information and local conditions – especially on the credit side of the retail banking market. 4 recent problems with schematic credit scoring systems have certainly reminded the banks of the value of real customer information and better selection of customers. whenever one discusses the future, it has to be borne in mind that we live in a highly uncertain world ; economic, political and technological factors may or may not develop the way we have been led to expect. however, there is one future development both banks and other

companies. under the prevailing legislative structure the supervisory responsibilities in case of banks, development finance institutions ( dfis ), and microfinance banks ( mfbs ) falls within legal ambit of state bank of pakistan while the rest of the financial institutions are monitored by other authorities such as securities and exchange commission and controller of insurance. in pakistan, while the overall assets of the financial sector have increased from rs. 5. 202 trillion in 2005 to rs. 11. 107 trillion in 2011, the share of the financial sector in terms of gdp is very low at 57. 4 percent. in 2011, banks held 74 percent of the financial assets while the share of nbfis was only 4. 7 percent of the total financial sector assets which was around 7. 6 percent in 2005. the low financial sector to gdp ratio and nbfis shadow banking : scoping the issues : a background note of the financial stability board, 2011. bis central bankers ’ speeches declining share in financial sector assets clearly underscores the need for financial sector development and diversification of financial sector assets to attract investors with different return expectations and risk appetite and channelize financial resources for the economic development of the country. therefore, today ’ s conference is very important and we should use this opportunity to understand the key bottlenecks in the way of financial sector development and also come up with concrete measures to address these shortcomings in a sustainable manner. alan greenspan identified the role of nbfis in strengthening an economy, as they provide “ multiple alternatives to transform an economy ’ s savings into capital investment [ which ] act as backup facilities should the primary form of intermediation fail ”. 2 on the other hand, the nbfis offer an alternative to typical commercial banking saving - investment products. however, in pakistan, nbfis other than investment banks and leasing companies which offer saving and investment products on a relatively small spectrum need to develop appropriate and affordable products to increase its market share. the key negative outcome of this is that there remains limited access to funding resources and relatively higher risk avenues to earn spreads. here i would like to briefly touch on the major constraints that the nbfi sector in pakistan is beset with : first, although there has been an increasing effort by nbfis to broaden the range of their business activities and product base, thereby diversifying their revenue streams, the sector is yet to make a breakthrough in this regard. second, the sector is fragmented and each nbfi