Analysis Of Internet Banking

Analysis Of ne dickensrk BankingThe commentary of network believeing varies in m each ways. Basically, cyberspace Banking can be understood as the new fashion to provide tuition related to to en confides and their dish up via an online homepage (Mahmood and Steve, 2009 Ongkasuwan and Tantichattanon, 2002). Daniel (1999), Arunachalam Sivasubramanian (2007) in whatsoever case defines net Banking as the slant of banks in organizeation and work to clients via incompatible delivery platforms, such(prenominal) as computer or mobile phone. Via the net using PC or mobile phone and web-browser, a banks nodes can request information and run out most banking services (Daniel, 1999 Mols, 1998 Sathye, 1999). Ongkasuwan and Tantichattanon (2002) be mesh banking service as banking service that allows customers to access and perform fiscal transactions on their bank accounts from their computers with profits connection.Some researchers delimitate Internet Banking based on wh ich services it offers to customers. Internet Banking is delivery enrapture of banking services which allows both private and corporate customers to use various banking transactions such as new account opening, payment, loan application and approval, cash management, etc. (Pikkarainen, Karjaluoto, and Pahnila, 2004). Internet Banking is also an electronic connection mingled with the bank and the customer with the aim of preparing, managing and controlling financial transactions for both parties (Burr, 1996). Pikkarainen et al (2004) define internet banking as an internet portal, through which customers can use different kinds of banking services ranging from carte du jour payment to making investments. With the click of a mouse, Internet Banking can help banking customers to access to almost any type of banking transaction (De Young, 2001). a nonher(prenominal) researchers define Internet Banking based on its benefits brings to banks. Pikkarainen et al, (2004) considered Intern et Banking as one of the cheapest delivery channels for banking products. Despite high starting-up costs of Internet Banking channel, Internet Banking clam up can become profitable when achieving a critical mass (Mahmood and Steve, 2009). Additionally, the use of the internet is seen as a new alternative channel for the distri preciselyion of financial services which offer competitive advantage (Flavin et al, 2004 Gan and Clemes, 2006). Because the rents of todays customers argon more(prenominal)(prenominal) sophisticated and demanding in the banking industry, classifyes alone are no longer capable (Mahmood and Steve, 2009). Internet Banking has provided an alternative means to acquire banking services more conveniently and become ideal for banks to meet customers expectations. Thanks to Internet Banking, banks can use information and communication technology to provide services and manage customer consanguinity more quickly and most satisfactorily (Charity-Commission, 2003) . Internet Banking has become the main means for banks to market and sell their products and services help banks stay profitable and successful (Amato-McCoy, 2005). This electronic distribution of services offers various benefits which will be discussed in the neighboring section. Additionally, the main characteristic of Internet Banking is that Internet Banking brings the differences between traditional, tangible market place and the virtual one (Rayport and Sviokla, 1994). nodes conduct banking transactions using online electronic channel instead of bank branches. Without visiting a brick and- mortar institution, through Internet Banking, a customer may perform banking transactions electronically (Al-Abed, 2003).In conclusion, for the exercise of this research, the researcher defines electronic banking as the new delivery of banking services and products through the use of electronic means such as mobile phones, or computers which machine-accessible to Internet in all the tim e and in all places. Such products and services can include deposit-taking, lending, account management, the provision of financial advice, electronic bill payment, and the provision of other electronic payment products and services such as electronic currency.2.1.2 Internet Banking Advantages and Disadvantages2.1.2.1 Internet Banking Advantages2.1.2.1.1 Customers ConvenienceCustomers enjoy the conveniences of internet banking services since Internet Banking fetchs banking transactions faster, easier and more efficient. Convenience has been identified by a number of studies as an authorised adoption factor (ACNielsen, 2005 Pew, 2003 Ramsay and Smith, 1999 Thornton and White, 2001). For customers, the benefits are more plectrum greater competition and correct value for money more information fall in tools to manage and compare information and faster service (Sergeant, 2000).With the provision of Internet Banking services, customers can be possessed of convenience in terms of 2 4/7 access (Pew, 2003). Traditionally, visiting a physical branch is the only way for customers to do banking transactions which require security and privacy. Without Internet Banking, bank transactions are only implemented within office hours. On the other hand, banks which offer Internet Banking are open for business every time and every place with Internet connection. Therefore, Internet Banking users are able to save time and transportation expenses, postponement time as well. When accessing the Internet connection, via phones or computers, customers can do banking transactions without any efforts. Internet Banking enables users to possess mobility since transactions can be performed in any time and at any place. Customers are increasingly mobile and demand for flexible services, as a aftermath, they prefer quick delivery of products and services.Additionally, Internet Banking also provides paper free, complete and up-to-date transactions (W expert and Ralston, 2002). Internet Banking users are easy to know all details of their period and past financial data and banking transactions. any inquiry or transaction is processed online without any reference to the physical branch at any time. Instead of filling out application form and sign many papers, or use ID card for security, consumers just log in their account and type account password, they arrive the accurate and updated financial data. real time account balances and information are available. For example, customers always update the information about interest rates and money-spending options.Compared with traditional over-the-counter banking, Internet Banking prime(prenominal) is not influenced by face-to-face contact between customers and banks (Lu Nancy Zheng, 2010). Banking transactions with the provision of Internet Banking can be automated. When banks do not offer Internet Banking, any banking transactions need the involvement of bank employees. Although human communication plays an import ant role in market, this can be considered as a double-edged sword. The reference of services depends on attitudes of bank employee. Moreover, Internet Banking benefits banks for minimizing the likelihood of committing errors by bank tellers (Jayawardhena and Foley, 2000). To nigh extent, not offering face-to-face contact can be seen as one of the advantages of Internet Banking.2.1.2.1.2 Increased ProfitsFirstly, Internet Banking helps improved profits by lowering operation costs. Expanding geographically by opening new branches requires high starting-up cost and aliment costs. With the help of Internet Banking, banking transactions do not require a physical presence. As a result, Internet Banking deepens reduction of overhead costs of physical channels, which require expensive buildings and a staff presence. Additionally, all banking transaction of Internet Banking is largely automatic which enables banks to reduce the workload of branch staff. Also, Internet Banking helps avo id errors related to data entry and personal communication mistakes. Indeed, banks not only save costs but also easier expand the traditional customer bases. Internet Banking replaces some of traditional bank functions to reduce significant overheads related to bank branches, as a result, Internet Banking is considered as one of the cheapest delivery channels for banking services (Arunachalam and Sivasubramanian, 2007). Moreover, Internet Banking helps banks in cutting cost, improve market share, maintain various E-business services, extend marketing and communication channel, search for new innovation services, and improve cross-selling opportunities (Ongkasuwan and Tantichattanon, 2002).Secondly, another basis why Internet Banking improved economic returns for banks is that Internet Banking allows banks to diversify their value creation activities. While doing transaction banking online, users easily approach with many other cross-selling banking services with details. Selling an additional product or service to an existing customer is called cross-selling. The profits can be gained not only based on actual offered services but also other cross-selling activities (Arunachalam and Sivasubramanian, 2007). According to Mahmood and Steve (2009), the higher than norm income and education take aims are more attracted by Internet Banking is high profit customers. base on detailed data about customers financial profiles and purchasing behavior, banks which possess detailed encountering of customers create customized advertising, customized products for bank users. By this way, not only on-line(prenominal) services banks offer but also other services can be sold. Internet Banking provides faster delivery of banking services to a wider range of customers (Oghenerukevbe, 2008). non only did the number of its online customer grow very quickly, but the new customer base was also very profitable.2.1.2.1.3 Competitive AdvantageThe use of Internet Banking can gain c ompetitive advantage to deal with globalization and fiercer competition (Flavin, Torres, Guinalu, 2004).Firstly, Internet Banking enables banks to achieve competitive advantage since having a large online and physical branch network. Operation cost per Internet Banking transaction is much lower than for other service delivery channels (Shah et al., 2007). Jayawardhena and Foley (2000) reported that the transaction cost for non-cash payment at a branch relative to the internet can be 11 times more than online transaction. By lower operation cost, Internet Banking enables a bank to survive the economic pressures and down-turns.Secondly, Internet Banking helps banks to gain competitive advantage since it is seen as one of those innovative ways to meet customers expectations (Mahmood and Steve, 2009). In this customer-centered business, customers are more demanding for products or services with high-quality, sold at less cost and delivered quickly. Thanks to its characteristics, Intern et Banking is one of the best options. Internet Banking helps banking users can access any transactions in all time and everywhere with the lowest costs.Thirdly, Internet Banking is considered as a key in both keeping customers loyal and accessing new markets. Apart from involution by selling products or services for new customers, maintain existing ones is equally important, especially in current difficult economic situation. There is more and more pressure on banks to diversify their products to create value. Otherwise, banks are likely to drag behind competitors and new entrants in financial sectors lose important current customer segment. For example, Woolwich Bank in the UK, compared with traditional banking customers, Internet Banking customers hold more number of financial products on average (Mahmood and Steve, 2009).2.1.2.1.4 Enhanced ImageInternet Banking helps to enhance the image of the organization since banks is seen as innovative organization offering innovative prod ucts. This image also helps banks more rough-and-ready at e-marketing. Internet Banking enables customers to access internet bank all the time and in all places which means that there is no boundary of spaces and time brings more opportunities to extend their descent with the customers Robinson (2000). More effective marketing and communication at lower costs will not only improve market image but also prepare banks to have better and quicker response to market evolution (Jayawardhena and Foley, 2000). Offering unembellished service delivery channels means wider choice and convenience for customers, which itself is an improvement in customer service. Internet Banking can be made available 24 hours a day throughout the year, and a widespread availability of the Internet, even on mobile phones, means that customers can conduct many of their financial tasks virtually anywhere and anytime.2.1.2.2 Internet Banking Disadvantages2.1.2.2.1 High costsAlthough Internet Banking saves infras tructure costs for banks as above mention reasons, banks introducing Internet Banking just made little savings (Young, 2007). The reason is that any savings are offset by above average wages and benefits per worker. Internet Banking needs a more skilled labor force to run the more sophisticated delivery system. Moreover, costs related extra security measures need taken into consideration.2.1.2.2.2 The negative effects on banks and customers raceThe traditional channels of offering banking services strongly focus on personal relationships. It is essential to maintain the human touch in customer services (Avkiran, 1999). Customers might be satisfied with the greeting, politeness, neatness of bank employees, ability to express aid for customers needs, apologize for customers complaints. The way of staff members serving customers are likely to influence customer gaiety directly. Internet Banking completely changes this aspect of customer and bank relationship since it is fully automa ted.A traditional bank provides the opportunity to develop a personal relationship with that bank. At a local bank branch, employee can make a conservation to ask their customers demand or help them to solve their problems, consult their financial decisions. It is increasingly personal contact with customers. The banker also will wank to know the customer and his unique needs. Meanwhile, Internet Banking just performs ballpark transactions without any face-to-face contacts (Cho et al. 2007). According to Broderick and Vachirapornuk (2003333), customers do not have interaction with employees in person.2.1.3 Internet Banking Barriers2.1.3.1 Accessibility to the InternetWireless communications enables Internet Banking become more and more accessible. Although the growth of the Internet has been very fast, there is still a large population who do not own computers or mobile phones connect to the Internet. For example, different from developed countries, Internet connectivity is still a problem in some rural areas and several developing countries. Lack of computer literacy is one of the reasons Internet Banking is less developed (Walczuch et al., 2000).2.1.3.2 Consumer BehaviorAs above mentioned, convenience is not only a key determinant of consumer contentment (Yang et al., 2003) but also one of the dominating factors in transaction channel preferences (Ramsay and Smith, 1999). In the field of Internet Banking, this is one of the most cited beneficial features because it offers more leisure-time when doing banking transaction (Devlin, 1995 Daniel, 1999 Liao and Cheung, 2002).Despite the awareness of Internet Bankings benefit, users are still reluctant to use Internet Banking. It is very common in developing countries to physically transfer money. The minority of customers are willing to use Internet Banking, whereas a large number of consumers of financial services are still uncomfortable to conduct their financial management online. The reason is that the use of new technology depends on the technology acceptance of customers and the consumer habits in each country.2.1.3.3 security department IssuesSecurity challenges banks to deal with customer fears in perform financial transactions using website as a channel (Aladwani, 2001 Sathye, 1999 Gerrard and Cunningham, 2003). In the first quarter of 2005, 80% of global online attacks towards the financial services sector (IDC, 2005).Customers tend to lack confidence in technology-based services delivery systems (Walker et al., 2002). For example, they are unsure that the transaction was completed or the transaction is delayed or not. Also, they are afraid that slow response time after completing leads to a delay of service delivery. This can result in transaction risk (Westland, 2002). This repairs mainly because of the quality of online services systems.Reputation of the bank also significantly affects customer adoption of new technology-based service delivery (Aladwani, 2001). Interestingl y, other researchers found that consumer is very much confident about their bank but they have less confidence in technology (Howcroft et al., 2002). Consumers express their concern that online banking is not likely to keep their information of transaction secure and private (Belanger et al., 2002 Salisbury et al., 2001). Therefore, it is essential for Internet Banking banks provider higher degree of security that enables customers to trust internet banking at all times and places (Daniel, 1999, Black et al, 2001 Polatoglu and Ekin, 2001 Suganthi et al, 2001 Gerrard and Cunningham, 2003).2.2 Understanding of Customer gaietyBoth business practitioners and academic researchers pay more and more anxiety to customer satisfaction (Bolton and Drew, 1991 Christian Bettina, 1999). Jamal and Naser (2003) emphasized the importance of customer satisfaction for marketers and researchers as well when stating that it is an important theoretical and practical issue. Thus, from the past on, cust omer satisfaction is defined by different studies in different ways which brings a diversity of definitions for customer satisfaction.Firstly, customer satisfaction can be basically defined by using its determinants. Many researcher used expectation and disconfirmation (Kang, Nobuyuki and Herbert, 2004), or expectation and performance (Johnson, Anderson and Fornell, 2001), or quality and disconfirmation (McQuitty, Finn and Wiley, 2000), or expectation and quality (Giese and Cote, 2002) as customer satisfactions determinants to define customer satisfaction. Meanwhile, Prabhakar (2005) found customer satisfactions factors include the price factors, product or services quality, customers expectations.Secondly, customer satisfaction can be defined based on two different conceptualizations, namely Transaction-specific satisfaction and Cumulative-specific satisfaction (Boulding, 1993). Transaction-specific satisfaction is a customers paygrade, based on both experience and reactions, towa rds a fussy service encounter (Cronin and Taylor, 1992 Boshoff and Gray, 2004). Cumulative-specific satisfaction is defined as customers overall valuation based on intact purchase and consumption experience (Johnson, Anderson and Fornell, 1995). While transaction-specific satisfaction provides specific transactional information about specific purchase occasion (Anderson, 1994b), cumulative-specific satisfaction refers to customers experience with past, current, and future performances.Thirdly, customer satisfaction is the gap while comparison between pre-purchased expectation and post purchase (Barsky, 1992 Oh and Parks, 1997 McQuitty, Finn and Wiley, 2000). This conceptualization is called the expectancy disconfirmation theory which developed by Oliver (1980). According to this theory, customers experience satisfaction when product or service is better than expected. Otherwise, if the performance is worse than their expectations, negative disconfirmation or dissatisfaction occu rs. Customer satisfaction is a highly personal assessment which consists of not only cognitive element but also wound up element. Customers buy products or services because the benefits products or services offer. Hanan, Mack and Karp, Peter (1989) stated that customers receives significant add-value is satisfied customers. Therefore, customers always expect products possess benefits they need.Apart from other above mention definitions, more definitions of customer satisfaction are presented in following Figure 2.1.Figure 2.1 Customer Satisfaction explanationNo.AuthorDefinition1Olshavsky Miller (1972)The consequence of the confirmation or positive disconfirmation of expectations, which means that the perceived performance is equal to or better than the expected outcome2Churchill and Surprenant (1982)An outcome of purchase and use resulting from the buyers comparison of the rewards and costs of the purchase in relation to the anticipated consequences3Woodruff et al. (1983)An emoti onal feeling in response to confirmation/disconfirmation4Peter Olson (1996)The degree to which a consumers pre-purchase expectations are fulfilled or surpassed by a product5Oliver (1997)Satisfaction is the consumers fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provided (or is providing a pleasurable level of consumption-related fulfillment, including levels of under or over fulfillment6Andreassen Lindestad (1998)The accumulated experience of a customers purchase and consumption experiencesDefinition of customer satisfaction and debates relate to this definition is widely discussed. On the other hand, in this study, customer satisfaction can be simply understood that customer satisfaction is the customer pleasure when products or services meet customers demand.2.3 The relationship between Customer Satisfaction and its antecedentsDue to the importance of customer satisfaction, a variety of research has been done to deter mine the factors influencing customer satisfaction (Churchill and Surprenant, 1982 Oliver, 1980 Barsky, 1995 Zeithaml and Bitner, 2003). According to Oliver (1980), there are three factors influencing Customer Satisfaction military service superior (1), Price (2), Privacy and Security (3).Figure 2.1 Factors influencing Customer Satisfaction2.3.1 The relationship between Service Quality and Customer SatisfactionConcepts of Service QualityThe most important component affecting customer satisfaction is Service Quality (Shelly Gandhi et al Cronin and Taylor, 1992 Oliver, 1993 Spreng and Machoy, 1996). Similarly with customer satisfaction, many academic researchers paid attention to service quality since it is a means of creating competitive advantages and customer devotion (Dawn et al., 1995).Generally, service quality measures whether services meet customers needs and expectations or not (Lewis and Booms, 1983). Cronin and Taylor (1994) defined service quality as a long-run overall evaluation of products or services whereas Bitner, Booms and Mohr (1994) defined service quality as the overall impression of the organization and its services. Similar to customer satisfaction definition, according to Parasuraman et al. (1985), service quality can be defined as the consumers comparison between pre-purchase service expectation and actual service performance. Since Parasuraman et al. (1985) proposed their conceptual model of perceived service quality, more and more attention has been paid to services quality. On the other hand, the research conducted by Parasuraman et al. (1985) is mostly recognized.Table 2.2 Dimensions of Service QualityAuthorDimensions of Service QualityGronroos 1982Technical qualityFunctional qualityCorporate imageZeithamls (2002)Efficiency dependablenessFulfillmentPrivacy reactivityCompensationContactJun and Cai (2001)ReliabilityResponsivenesscompetencyCourtesy credibilityAccessCommunicationUnderstandingCollaborationContinuous improvementYang et al. (2004)ReliabilityAttentivenessEase of useAccessCredibilityGarvin (1988)Besterfield (2003)PerformanceFeaturesConformanceReliabilityDurabilityServiceResponseAestheticsReputationAfter researching different types of services, such as long-distance telecommunication companies, accredit card companies, motor repair shops and banking industry, Parasuraman et al. (1985) stated that there are ten determinants of Service Quality as followsReliability The ability to perform services to customers right the first time and provide reliable and accurate services as promised.Tangibles Physical evidence of the services (neat appearance of employees, modern equipment and facility).Security Providing services without any risk or danger.Access unproblematic to approach with services and contact with employees for request.Communication Understanding and listening ability to customers, knowing what customers want to help.Courtesy venerate customer, being polite and friendly to customers, express t he concern related to customers problems.Credibility Building and achieve honest and trustworthiness towards customers.Understanding Knowing the customer what is customers needs.Competence Possession of the required skills and knowledge to perform the service.10. Responsiveness The willingness or readiness of employees when interact with customers requests.However, later in 1988, these above mentioned ten dimensions were cut down to fives by Parasuraman et al. (1985)Tangibility the appearance and availability of physical equipment, appearance of personnel.Reliability the ability to perform the service promptly with high quality in the dependable and accurate way.Responsiveness the readiness to help customers.Assurance includes four elements, such as Competence, courtesy, credibility and security. The ability to communicate with customers in the knowledgeable and understandable way to express customers and convey trust and confidence to them.Empathy includes access, communication, a nd understanding the customer. The ability to express the concern with customers, pay attention to their needs and problems in a caring and individualized way.The relationship between Service Quality and Customer SatisfactionVarious academics have studied service quality and customer satisfaction in order to understand customer evaluation (Bitner Hubber, 1993 Boulding, Staelin, Kalra, Zeithaml, 1993 Oliver, 1993 Parasuraman, 1985). In many study researching on customer evaluation, quality and satisfaction are used interchangeably since they both presents the comparison of customer expectiation and actual service performance (Lowis and Boom, 1983 Parasuraman, 1985).On the other hand, there is still difference between two concepts. Customer satisfaction is more specific, short-term evaluation while service quality is more general and long-term evaluations (Dabholkar, 1993 and Gotlieb, Grewal and Brown, 1994).In contrast, according to Wilson et al. (2008), customer satisfaction is mo re permanent than service quality since it more often than not is a broader term, some dimensions of customer satisfaction are specifically focused on by service quality.As defined above, customer satisfaction has two definitions as transaction-specific and cumulative-specific customer satisfaction (Boulding, 1993). Regardless of whether customer satisfaction has been defined by transaction-specific or cumulative-specific definitions, service quality is one of the most important antecedents of customer satisfaction (Oliver, 1993 Anderson Sullivan, 1993 Fornell et al., 1996 Spreng Macky, 1996). The higher service quality is, the higher satisfaction is (Parasuraman et al., 1985).From the past on, service quality and customer satisfaction is highly related which proved by many studies with practical examples. For instance, Brady et al., (2001) used SERVQUAL in examine the relationship between customer satisfaction and service quality in fast-food restaurants in America and Latin Ame rica. SERVQUAL model includes ten aspects responsiveness, courtesy, communication, reliability, security, competence, access, understanding the customers, credibility and tangibles. Additionally, LISREL was used to conduct the test the same positive relationship in a health care service in Ruyter et al. (1997).Based on the research conducted by Yang et al. (2004) related to E-Service, the study will focus on five Service Quality Dimensions as followsReliability Accuracy and prompt of transaction performance.Attentiveness Availability to serve customer, willingness to help customer, pay individualized attention and personal contact to customers.Ease of use Easy to remember URL address, well-structured web-design, easy-to-follow, update information, concise, simple and understandable contents, terms and conditions.Access Accessibility of different transaction services, availability of communication channels such as chat rooms or emails, details contact of service personnel.Credibility The reputation of service providers.Based on the above discussions, the hypothesis (H1) is formulated.H1 Service quality has a significant relationship with customers satisfaction in Internet Banking.2.3.2 The relationship between Price and Customer SatisfactionConcept of PricePrice plays an important role in the survival of the company since it decided the competitiveness and revenue of a company. According to Price Theory, price reflects interaction between supply and demand in the market. In other words, price is determined by what a customer is willing to pay and what a seller is willing to accept. With this agreement, both customers and sellers get mutual benefits because customers take advantage of the product usage while sellers get their economic returns. Similarly with Price Theory, Stanton (1985) defined price as the amount of money or goods needed to acquire some combination of another goods and its companying services.These findings are also consistent with other resear ch findings. For example, Kotler (2002) defined price as the total amount customer needs to exchange in order to obtain a benefit of the products or services price is the amount of money charged for a product or service. In order to achieve marketing objectives, The Marketing Mix is essential for firms and includes four P (Product, Price, Promotion, Place) creating general and specific marketing strategies for the whole company (Kotler, 2002). Price is one of the four P in The Marketing Mix which developed by Philip Kotler.The relationship between Price and Customer SatisfactionThere is a clear link between customer satisfaction and price perceptions (Kyriazopoulos, 2007). Numerous studies discussed the relationship between price and customer satisfaction. For example, this relationship is proved through the study conducted in German car dea