CONTEXT NORMATIU NORMATIVA ESPECÍFICA CURS 2014/15

The Internet banking definitions were provided in different studies such as (Aladwani, 2001, Pikkarainen et al., 2004, Wan et al., 2005, Corrocher, 2006, Sayar and Wolfe, 2007, Herington and Weaven, 2007, Chong et al., 2010). Table 2.3 shows those definitions. It can be noted that most of the these definitions emphasize that banks should provide online services where customers be able to perform different activities, such as balance reporting, bill payment, making investments, opening an account, transferring funds and electronic online payments. It can also be noted that some of these definitions that have been provided by Wan et al. (2005), Herington and Weaven (2007) and Chong et al. (2010) did not differentiate between Internet banking and Internet branch. Sayar and Wolfe (2007) give a clear differentiation between the concept or the meaning of Internet banking and Internet branch. Sayar and Wolfe (2007) stated that Internet branch is a website homepage that can be used to access the Internet banking account and perform financial activities, which means that customers have to access the bank’s homepage and then click the icon that leads to the Internet banking accounts. Thus, that it can be said that any bank with only a homepage that is used for providing information about the services or products, without letting customers conduct any financial transactions will not be considered to offer Internet banking services.

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Here, the concept and definition of Internet banking would be applied because the current study attempts to assess the behaviour of Internet banking users who performed financial transactions online so that the current study defines Internet banking as a portal that allows customers to access their Internet banking account from different places and times, and perform different types of financial transactions, ranging from opening online accounts to making investments. It can be noted from this definition that customers have full control of different financial activities.

Table 2. 6: Internet Banking Definitions

The author/s Year The definition

Aladwani 2001 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” (p. 214).

Pikkarainen et al.

2004 Internet banking is “an Internet portal, through which customers can use different kinds of banking services ranging from bill payment to making investments” (p. 224).

Wan et al. 2005 The virtual bank can be defined as a “non-branch bank” (p.

256).

Corrocher 2006 The term Internet banking refers to “the use of the Internet as a remote delivery channel for banking services, which include both traditional ones, such as opening an account or

transferring funds, and new ones, such as electronic online payments”(p. 536).

Herington and Weaven

2007 Internet banking is “a form of e-service in that customers will learn from the electronic interface and customer service may be significantly influenced by customer performance” (p. 408).

Sayar and Wolfe

2007 The term “Internet banking” is used to describe “the case where banks’ customers conduct banking transactions on the Internet”

(p. 123).

Chong et al. 2010 Internet banking as “a new type of information system that uses the innovative resources of the Internet and WWW (world wide web) to enable customers to effect financial activities in virtual space” (p. 269).

The following section will illustrate the importance of Internet banking services as an IT technology for banks and customers.

51 2.5.2 The Importance of Internet Banking (IB)

The importance of Internet banking can be seen from different perspectives. It can be seen from a statistics viewpoint as the number of Internet banking websites and the world trend of the Internet banking. It can also be seen from a banking perspective as the advantages that can banks obtain from adopting and providing online services. Finally, it can be seen from a customers’ perspective that highlights the advantages those customers can get from using and adopting Internet banking.

2.5.2.1 Internet Banking From a Statistics Viewpoint

It can be noted from the literature that Internet banking is growing dramatically in both developed and developing countries. A considerable number of existing researches were conducted in many countries with different cultures, values and beliefs to examine customers’ behaviours towards Internet banking. According to Barwise (1997) cited in Sathye (1999), in ten years’ time it is estimated that 60% of retail banking transactions will be carried out online. Booz et al. (1997) cited in Sathye (1999) estimated that over the next five years 20% of retail and 30% of corporate customers will use some forms of Internet banking.

According to Aladwani (2001), the online banking adoption rate in European Union countries is increasing dramatically (Irish_Times, 1999) and international banks and financial institutions operating online are also growing rapidly. Polatoglu and Ekin (2001) stated that Internet banking transactions cost the banks only one twentieth of a teller transaction.

González et al. (2004) state that more than 11,250 e-banking sites have been established. 170 online banking sites were available in Spain alone. The largest numbers of e-banking websites in Europe are in Spain, Germany, UK, Italy and France.

2.5.2.2 Internet Banking from a Bank’s Viewpoint

Banks has been encouraged to adopt online services (Internet banking) to achieve some strategic goals and meet market demands. Internet banking has been stated as an important strategic tool that can be adopted to achieve different goals (Sathye, 1999, Aladwani, 2001, Polatoglu and Ekin, 2001, Thornton and White, 2001, Nielsen, 2002, Bradley and Stewart, 2003b, Devlin and Yeung, 2003, Mukherjee and Nath, 2003, Rotchanakitummuai and Speece, 2003, Corrocher, 2006, Gan et al., 2006) . For achieving strategic goals, reducing operating costs might be one of the significant issues that encourage banks to adopt Internet

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banking. According to Sathye (1999), there will be significant reduction in structure costs over traditional delivery channels when Internet and other virtual banks channels are adopted, because for average banks, Internet banking can be operated at an expense ratio of 15-20 per cent, compared to 50-60 per cent for traditional channels (Booz et al., 1997). According to Shroder Salomon Smith Barney (1999), cited in Corrocher (2006), when banking channels are compared, it can be noted that Internet banking costs less than 1% and telebanking costs less than 50% of traditional branch banking, while ATM transactions costs 50% of telephone banking.From the market perspective, Sathye (1999) stated that Internet banking would be forced to be adopted by banks in order to meet the competitive pressures from new players, such as software and telephone companies, that have intentions to enter to the online banking market. In addition, many customers from different geographical areas can be reached and general information about the banks’ services and products can be provided. In addition, performing interactive retail banking transactions can be done by adopting telecommunication systems and technologies such as telephone banking and Internet banking (Aladwani, 2001). Currie (2000) stated that enhancing the competitive position, meeting consumer demand, creating new distribution channels, improving business image and reducing costs are the important business drivers to adopt technologies. Polatoglu and Ekin (2001) provided an example of one of the five largest commercial banks in Turkey (Garanti Bank). Its aim was to move from branch-dominated banking into multi-channel banking in order to achieve goals such as customer involvement in financial services so that branches’

workloads can be reduced, the cost of transactions can be reduced, and customer retention and loyalty by offering further conveniences and ease to access to banking services can be improved.

Nielsen (2002) stated that long-term relationships with customers can be enhanced by adopting advance technologies and communication tools and providing service quality and market responsiveness so that banks can achieve a differentiation advantage. Mukherjee and Nath (2003) stated that an important issue is the continuous interaction between the seller and buyers to establish mutually beneficial relationships, especially in e-commerce such as relationship banking which is more market challenged. Rotchanakitummuai and Speece (2003) mentioned that different distribution channels are important and powerful because they can retain, for example, current online users to use the services from any locations. By using Internet banking, banks can maintain their relationship with their customers and providing different and new services and products so that price discrimination over the

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Internet can be implemented (Corrocher, 2006). In order to have competitive advantages in the market, customers’ information might be the important issue in order to provide and deliver quality services to the customers. A considerable amount of customers’ information can be saved in the web. Taking permission from customers to use their personal information for marketing or service improvement purposes, customers’ demographics, cultural backgrounds and websites behaviours can be collected in order to better serve customers, and different services can be customized to fit with customers’ requirements and needs.

2.5.2.3 Internet Banking from Customers View Points

Customers can gain some advantages from using Internet banking such as sufficient information and price transparency, as well as 24/7 accessibility being possible (Bradley and Stewart, 2003a). Internet banking providers can provide different information that can help and guide customers as to how financial transactions can be performed, as well as increase customers’ own financial knowledge so that their skills and abilities to evaluate the banks’

services can be improved. As a result of providing a relative, quality and ease information, the more customers can recognize the benefits of the banks’ online services that the more their perceptions of how useful the website can be improved so that this may directly or indirectly influence their satisfaction and loyalty with their current banks, and their banks will be more favourable than others in the market.

In addition to the quality information that can be provided via Internet banking, it can also provide some different advantages such as customers being able to perform their financial transactions at any time from anyplace so that the boundaries will disappear. For example, customers can access their online accounts from home and work instead of going to the physical branches where the time that customers will taken for service can be long and the travelling cost may be high compared with when they perform their financial transactions from home or when they have free working time. Rotchanakitummuai and Speece (2003) stated that having direct access to the financial information and undertaking financial transactions without the need to go to the bank can be possible for Internet banking customers.

Compared with the use of traditional branches, Internet banking can provide customers with full control of their accounts so that the most cited transactions that customers are likely to perform, via the Internet branch, are opening a bank account, transferring funds from

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different accounts and electronic online payments such as bills payments or shopping payments. Moreover, customers can setup standing orders and direct debits. They will also be able to carry out some investment activities, such as stock market investment and it was noted that customers can perform different financial transactions, such as opening an account, transferring funds and electronic online payments (Corrocher, 2006, Chong et al., 2010). By using Internet banking, customers are allowed to perform a wide range of financial transactions electronically via the banks’ website at anytime, from anywhere, faster and at lower fees than with traditional banking branches (Tan and Teo, 2000, Grabner-Kräuter and Faullant, 2008).

In traditional banking services, customers might be charged for the services such as transferring money internationally. For example, when the customer wishes to transfer money from the UK to the USA, the HSBC banks will charge customers £37 for the services in the branch, but when this transaction is carried out via the Internet banking branch, the customer was charged only £9. Thus, a considerable saving can be made from using Internet banking (real example from the researcher).