Essay Examples - Information Technology Essays
Consumer and Bankers attitude towards internet banking
An Empirical Study
Internet has made a prolific influence on the business world. Today almost all business houses are looking to reap the perils of the internet and enhance their business prospects. This can be attributed to the numerous advantages internet provides to its users.
The new technological innovations have allowed organisations to conduct business in a completely new way by using online electronic transaction mechanisms and the concept of E-Commerce evolved (Gunasekaran & Love, 1999; Westland and Clark, 1999). Owing to the multifaceted advantages internet offered, the banking sector also joined the E-Commerce bandwagon and actively used internet for its various operations. The impact of internet was such that many banks opted for 'Internet only' operations and completely removed their traditional banking system. However, banks seem to be retracting from the concept of 'Internet only' banking and no traditional banking options though the banks do stress the need of keeping a strong presence in the online banking market in order to sustain the competitive advantage. Internet banking was expected to grow at a rate of anywhere from 40% to 80% between 1999 and 2003, leading to an estimated 24 million individuals banking online by the year 2003 (Orr, 1999). In reality the figure was 37 million users by the year 2002, these users were actively using online banking for their personal or business banking purposes.
Even after the immense popularity of internet banking many users still do not prefer it over traditional banking due to the risks associated with it. Bruno (2001) cites a case where a college drop out used the security loop holes in the online banking system and withdrawing huge sums of money from the accounts of noted celebrities. This seems to be one of the many reasons why customers are wary of online banking instead of traditional branch based banking. According to Hawke (2001) approximately 90% of the banks have the internet banking facility available to them but only 13% of them seem to be using it. This study will try to bring out the issues related to internet/online banking in the current scenario from the consumer as well as the banker's perspective. Combined with a previous work (Barczak et al, 1997; Lin and Shao, 2000; Liao and Cheung, 2001), it is hoped that this study can contribute to research into the complementary relationships between the consumer and the banker in an online banking setup.
2. Literature Review
Internet/Online banking is the newest delivery channel for retail banking services. Online banking refers to several types of services through which bank customers can request information and carry out most retail banking services such as balance reporting, inter-account transfers, bill-payment, etc., via a telecommunication network without leaving their homes or organizations (Daniel, 1999; Sathye, 1999). There are two know models that most adopt in order to incorporate in their banking strategy. First model refers to the 'Internet only' model. In this model there is no actual branch and no paper based transaction. This is a relatively new model and generally it seems to make banking more efficient by reducing bureaucracy, paper work and delays in processing. The second model is adopted by most of the banks in which the traditional banking system is used along with internet banking giving the customers the choice to use any or both systems. This model is nowadays called as 'Clicks and Mortar' system. According to Senior (1999) the banks using 'Clicks and Mortar' model find it more convenient to pursue customers to use internet banking as compared to 'Internet only' banks.
Mols (1998) lists some of the services that banks provide through the use of internet like balance viewing, bill payments, fund transfer etc. The range of services provided by the bank depends on the Internet banking model implemented by the bank. Generally the services that are offered through a bank's website can be distinguished into 4 categories namely Help Services, Basic Transactions, Advanced Transactions and General Account operations. All these services will be reviewed in detail in the final research report.
Some of the important advantages that internet banking provides apart from checking online statements and balance, paying bills, moving money from one account to another are as follows. Internet banking is a major cost saving factor (cost per transaction) for the banks who have implemented it. This applies to the bank (Orr, 1999) as well as the customer (Osterland, 1999). The banks reap the additional benefits of getting more long term customers and they can provide more and more efficient additional services to its customers (Dixon, 1999). Businesses want efficiency in trade and lower transactions costs, and Internet-based payments benefits both banks and businesses (Messmer, 2001).
The Basel Committee report on banking supervision (1998) states that the agency "recognizes that along with the benefits, electronic banking and electronic money activities carry risks for banking organizations, and these risks must be balanced against the benefits". Some of the main risks that were listed in the reports were operational/security risk, legal risk, reputation risk and traditional banking risk. Here reputation risk is closely related with all the other factors. Any security problems or legal issues or traditional banking problem will affect the reputation of the bank. Legal risks arise due to violation of laws, rules and regulations. In the world of electronic commerce, there is considerable ambiguity and uncertainty regarding legal rights [Pennathur, 2001]. The problems will be explained in detail in the final report of the study.
The above mentioned text is based on the author's preliminary review of the literature. The detailed literature review in conjunction with the empirical data collected and analysed will be presented in the final report. The next section will elaborate the research methodologies the author intends to use in order to achieve the aims and objectives of this study.
3. Aims & Objectives
The main aim of this project is to find out the customers as well as bankers perspective towards Internet banking. Alongside the study will also try to find out how much online banking has influenced the traditional retail banking industry and will measure the level of customer's satisfaction and their attitudes towards Internet banking and branch networks. Additionally this dissertation will also provide with accurate, up-to-date, research-based information about possible future trends in Internet banking. And lastly, this research will provide some suggestions and recommendations to be considered for the improvement of Internet Banking and to develop ideas for further research in this context.
To summarize some of the questions that will be addressed through this research are as follows:
- What prompts the non-internet banking customers to adopt internet banking?
- What is the percentage of customers against the use of internet banking and why?
- What are the problems faced by customers and bankers?
- What are the factors that influence the development of Internet banking as per the bankers?
- What is the future of Internet banking?
- Does online banking open up new markets for banks?
4. Research Methodology & Analysis
A good research methodology is a general plan of how the researcher will go about answering the research questions considering the sources to collect data and the constraints that one might have (access to data, time, location and money, ethical issues etc). It should reflect the fact that the researcher has thought carefully about why a particular strategy has been employed. A collection of methodologies will be used to carry out this research. Both primary and secondary data will be collected for this purpose. The secondary data will comprise of data from literature reviewed from books, journals, Internet and the annual reports of the companies while the primary data will take the form of information/results collected from questionnaires and surveys. There are different research strategies that one might employ. They are: experiment, survey; case study, grounded theory, ethnography, action research, cross sectional and longitudinal studies, exploratory, descriptive and explanatory studies. Out of all these, the researcher has chosen the Case study and Survey strategies for the research. Both of them are common and popular strategy in business and management research. Through this a large amount of data can be collected in an economical way.
A case study is a detailed examination of one setting, or one single subject, or one single repository of documents, or one particular event [Bogdan and Biklen, 1982]. Case study approach is supposed to be the most appropriate research strategy for the fulfillment of the aims and objectives of a particular study. Case study approach is categorized as 'Non-Participant' qualitative research. Therefore, the first stage of research will comprise of short listing of the banking institutions where the case studies will be carried out. The first criteria will be selecting those banks which have an online presence. Also for the purpose of comparative study, the banks selected will have to be of same size. Finally, in order to come up with more comprehensive conclusions, banks operating on 'click and mortar' as well as 'bricks and mortar' model will be examined. Banks with traditional branches along with Internet banking as part of their delivery channels will be included in the case study. Once these banks are short listed, each bank will be subjected to an in depth analysis of their adopted strategy towards online banking as well as traditional banking. The idea behind this is to observe the administrative style, banking activities, customer involvement, support system, staff attitude etc of the selected banks.
Survey research is one of the most widely used forms of research among the business researchers. It involves researchers asking a large group of people questions about a particular topic. All surveys possess three basic characteristics: (1) the collection of information (2) from a sample (3) by asking a question. A survey can be carried out by conducting interviews with individuals or groups and use of questionnaires. In the second stage of the research the researcher will be interviewing small groups of customers and bankers which will be followed by a detailed questionnaire, testing quantitatively a much larger sample of bank customers and staff. This method advocated by Burns and Grove (1997) is a relatively new approach and is often called the triangulation method. There will be two different questionnaires one for the customers and the other for the bankers. Based on the initial literature review the author would like to present two preliminary sample questions that may be included in the questionnaire. These questions may be reviewed later based on detailed literature review, case study results and interviews.
For the Customer Questionnaire:
Q: Why will you prefer your bank to provide with the Internet Banking facility?
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Reasons |
Strongly Agree |
Agree |
Neutral |
Disagree |
Strongly Disagree |
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Gives me the authority to do things |
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Convenient and accessible all the time |
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More value for Money |
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Single window for all my financial needs |
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User friendly |
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Responsive |
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I don't have to wait in a queue |
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Transactions are faster |
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The Branch is too far away |
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Others | |||||
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For Bankers Questionnaire:
Q: Your organizations predominant factor to be on the Internet?
- To build market share
- To expand geography
- To reach profitable customers
- To remain competitive
- To serve the customers better
- To lower operations cost
- Others
Research analysis will be done based on the method proposed by Hycner (1985). According to him, the analysis requires the researcher to read the transcripts; identify themes; confirm the accuracy of the interpretation and produce a final summary. Thus the information will be analyzed accordingly and a brief summary will be prepared. Validity will be obtained by the two phase triangulation method, in which, after the analysis of the interviews, the summary will be used to refine the preliminary questionnaire, this, in turn will be submitted to a larger sample of similar customers and bank staff members.
References
Barczak, G. Ellen, S.P. Pilling, B.K. (1997) Developing typologies of consumer motives for use of technologically based banking services, Journal of Business Research 38 (2), 1997, pp. 131-139.
Basel Committee report on banking supervision, (1998) Basel Committee report on banking supervision, 1998. Risk management for electronic banking and electronic money activities. Bank of International Settlements, Basel.
Bogdan, R and Biklen, S. (1982). Qualitative Research for education. Boston: Allyn and Bacon.
Bruno, M. (2001) Secure. Really? U.S. Banker (May) 22.
Burns, N., & Grove, S. K. (1997). The practice of nursing research. Conduct, critique and utilization. Philadelphia: W.B.Saunders.
Daniel, E. (1999). Provision of Electronic Banking in the UK and the Republic of Ireland. International Journal of Bank Marketing, 17(2), 72-82.
Dixon, M. (1999) 39 Experts Predict the Future, America's Community Banker (Jul 19998), 1999, p. 20-31.
Gunasekaran, A. & Love, P. (1999). Current and future directions of multimedia technology in business. International Journal of Information Management, 19(2), 105-120.
Hawke, J., 2001. Internet banking. Remarks before a Conference on Financial E-Commerce, Federal Reserve Bank of New York, New York.
Hycner, R H (1985) "Some guidelines for the phenomenological analysis of interview data," Human Studies 8, 279-303
Liao, Z. and Cheung, M. T. (2001) Internet-based e-shopping and consumer attitudes: an empirical study, Information & Management 38 (5), 2001, pp. 299-306.
Lin, W.T. and Shao, B.B.M. (2000) The relationship between user participation and system success: a simultaneous contingency approach, Information & Management 37 (3), 2000, pp. 283-295.
Messmer, E. (2001), Banks explore B2B payment options. Network World (May 7) p. 57.
Mols, N. (1998). The behavioral consequences of PC banking. International Journal of Bank Marketing, 16(5), 195-201.
Orr, B. (1999) At Last, Int ernet Banking Takes Off, ABA Banking Journal (91), 1999, p. 32-34.
Osterland, A. (1999)Nothing but Net; Bank One's Wingspan Leaves Bricks and Mortar Behind, Business Week, August 2, 1999, p. 72.
Pennathur, A. (2001). Clicks and Bricks: e-Risk Management for banks in the age of the Internet. Journal of Banking & Finance. 25 (2001) 11 (11).
Sathye, M. (1999). Adoption of Internet Banking by Australian Consumers: An Empirical Investigation. International Journal of Bank Marketing, 17(7), 324-334.
Senior, A. (1999) Branding, Money Concerns Halt a Web-Only Plan, American Banker (164), 1999, pp. 1-3.
Westland, J. & Clark, T. (1999). Global electronic commerce: theory and case studies. Cambridge, MA: MIT Press.
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