Banking system is very essential part to boost up the economy on all over the world. The adoption of Internet banking in Pakistan will have its own advantages to both the banks and the ultimate customers. Internet banking is offering a very simple, convenient and secure method of accessing bank accounts on the Internet. Cost reduction, effective, easy to maintain, speedier and highly competitive would be the use of information technology. It’s so easy to access and manage your finances in a secure, real-time, online environment anywhere and anytime. Internet Banking facilitates the customer to check his or her balance over the net. This is conducted via wireless technology through both personal digital assistants (PDAs) and cellular phones. Online banking system present to their consumers a set of information-related benefits that favors to adopt e-banking, including the facility for the customers to control their bank accounts at any time and any place, and to access information content for making investment and financing decisions (Howcroft B, 2002).This is similar functionality to PC banking but is accessed through browser of any proprietary software (Shanmugam & Krishna Guru .2003). It is not only beneficial to manage personal finance but also help in managing different types of business finances. Internet banking the use of technology to communicate instructions to and receive information from a financial institution where an account is held. Internet banking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial product and services through a public or private network, including the Internet. When first introduced, Internet banking was used mainly as an information presentation medium in which banks marketed their product and services on their Web sites. With the development of asynchronous technologies and secured electronic transaction technologies, however more bank have come forward to use internet banking both as a transactional as well as an informational medium. As a result, registered internet banking users can now perform common banking transaction such as writing checks, paying bill, transferring funds, printing statements and inquiring about account balances. Internet banking has evolved into a “one stop service and information unit” that promises great benefits to both banks and customers (Lewis et al., 1997). In internet banking Security standards has prime importance The Internet dissolves traditional boundaries between financial institutions and empowers individuals to choose and define their own financial futures (Shevlin, R.A, .2003).
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Internet Banking in Pakistan:
The internet banking is becoming an increasingly important channel in Pakistan’s banks to provide banking services to both individual customers and businesses. Internet banking refers to use of the Internet as a remote delivery channel for banking services (Frust et al., 2000). Bank offers Internet banking in two main ways (Frust et al., 2000). An existing bank with physical offices can establish a Website and offer Internet banking to its customers as an addition to its traditional delivery channels. A second alternative is to establish a virtual Internet-only banking. The computer server that lies at the heart of an Internet-only bank may be housed in an office that serves as the legal address of such a bank, or at some other location. Internet-only banks may offer their customers the ability to make deposits and withdraw funds via ATMs or other remote delivery channels owned by other institutions. Internet banking service is presently being offered to two sets of client i.e. personal clients and business clients.
Internet banking includes payments and electronic funds transfer (EFT). The funds transfer, however, is presently limited to intra bank account to account funds transfer except for a bank which offers interbank funds transfer facility through internet. Internet banking in Pakistan is growing slowly but at a steady pace. During FY09, banks reported 2.1 million transactions involving an amount of Rs68.4 billion. This shows an increase of 59 percent in numbers and 56 percent in amount compared to increase of 49 percent in value and 58 percent in amount recorded last year.
There are few banks which offer transactions through mobile. These transactions include payment through mobile (excluding utility bills payment), utility bills payment, A/C to A/c funds transfer and third party A/c to A/C funds transfer. The number of transactions was 71,240 for fiscal year 09 shows an increase of 46 percent in number of mobile transactions. In terms of value, it reached Rs16 million registering an increase of 30 percent. (www.sbp.org.pk)
Difference between Internet Banking and Electronic Banking:
Some people use term Electronic banking as a substitute of Internet banking. The term electronic banking is most wide in its nature and therefore it is normally used without any further justification or description. Electronic banking is not equal to the term Internet banking even though the latter is undoubtedly the most common type of it. Electronic banking includes several transaction services like telephone banking, credit cards, debit cards, ATMs. The most recent additions are Internet banking, mobile banking and digital PC banking. Electronic banking is also known as electronic funds transfer (EFT) and basically is simply the use of electronic means to transfer funds directly from one account to another. Internet banking services are crucial for long-term survival of banks in the world of electronic commerce.
Features of Internet Banking:
Internet banking is a method of banking that is popular due to the convenience of having an online banking account. Individuals no longer have to worry about making time in their daily schedule to visit the bank when they have an access to their bank account over the internet. Using the internet for banking allows many banking functions to be performed remotely, either from home, work, or when you are traveling out of town. Banking online is a tool of convenience, but it also must be used intelligently.
Manage your Account:
Simple and intuitive 24/7 access to your accounts. You can keep an eye on cash flows, transactions and check real-time account balances
Send Money to anyone using the new PC-to-Person facility:
Net banking service to give you power to send money to anyone in Pakistan even if they do not have a bank or account in any bank. You can either send money to another bank customer through Account-To-Account transfer, or get a TezRaftaar, western union cheque delivered at payee’s doorstep just within 48 hours anywhere in Pakistan.
Real-Time Account Balance & Summary:
Net banking offers easy, 24-hour access to the account information. The customers can see an overview of the listed accounts in a summarize form with the available account balance. Using net banking the customer can also keep an eye on their cash flows, transactions and check their balances before paying their bills or scheduling a transfer.
Using net banking, the customers can manage more than one account. All accounts are linked, which enables them to perform fund transfers and set auto transfers between these accounts .If you have multiple accounts with the same Internet bank, you can easily move funds online from one to the other. This also includes credit cards, so you can pay your credit card bill online from your checking or savings account. This allows you to do transactions that would otherwise require sending a check through the mail or making a personal visit.
Pay your Bills Online:
Pay Bills online to a growing list of billers. Net banking offers the convenience to pay bills, like PTCL, GAS, etc through online. Customers can make instant payments or schedule their recurring payments on monthly or weekly basis.
Transfer Funds between your Accounts:
Customers can make instant transfers within their portfolio accounts. Having details of Debit & Credit accounts with amount to be transferred, the customer can instruct payments as per his own convenience. All transactions that are either rejected or are still in processing are displayed in the Pending/Rejected transactions.
Schedule Recurring or one-off Payments:
Customers can schedule monthly, weekly, annual and time-factor based payments through net banking. The customer is only required to select the debit and credit accounts, specify funds and define the fund transfer frequency. The Auto Transfer Instructions can be deleted and modified by the customer as per his convenience.
View Account Statements:
Customers have the option of specifying a date range to view the account statements. The Customers can also print, email and analyze the statement in a graphical chart.
Receive Customized Alerts:
Customers can set alerts to track movements in the listed accounts. The customer can assign a target for alerts. Alerts can be of the following types.
Cheque Tracking Alert
Low/High Balance Alert
Customers can perform all the above transactions and more, from the comfort and convenience of your home or office internet-connected computer, at any time of the day or night.
Customer Perspective about Internet Banking:
From the customer perspective Internet banking provides a very convenient and effective approach to manage one’s finances as it is easily accessible 24 hours a day, and 7 days a week. Besides, the information is current. For corporate customers, sophisticated cash management packages offered through Internet banking provide them with up to the minimum information, allowing the timely fund management decisions.
Issues in Internet Banking in Pakistan:
There are a number of issues which exist in Internet banking. Some of the prominent ones are services to customer’s survival, accessibility, security, infrastructure, perception, etc, which are important in the study of Internet banking. Trust has a significant impact on the acceptance of internet banking (Suh and Han.2002).This study focuses on security and legal, forgetting PINs and password, privacy and etc which have considered importance both for bank as well as the customer especially in the context of Pakistan market.
Security and Legal Issues:
Security is the main issue which first comes in customer mind. Strong concern about security is one common issue related to unwillingness to use internet banking services (Madu,2002).Security violation problem such as destruction of operating system, or disruption of information access(Min and Galle,1999).Most customer are not satisfied with web security system (Black,2000).In internet banking, security is one of the most important future challenges, because customer fear higher risk in using the Web for financial transactions (Cunningham,2003).The legal issue another important problem which is not much focused in Pakistan. The stories of hacking and cracking, un-authorization, authentication and information leakage are some crucial problems, which have not been completely answered by bank.
Forgetting PINs and Passwords.
Sometimes, in internet banking has such important problems, which are very difficult to cover up. Internet banking is a blessing but if someone forget PIN and password. There is no such solution to this problem but bank providing other PINs or some other solution which most of the bank already using. (Nadir Ali Kolachi, 2006)
Privacy is a consumer issue of increasing importance. In internet banking personal information’s are very private or confidential. The information should be very much secret. The bank should ensure the privacy of all these information. According to (Zeithaml et al., 2002), privacy is one of the vital elements of the system trust. It mean that any kind of customer information or data not be shared or misuse by the organization. Customer who adopt electronic financial service are more likely to perceived problem related to loss of privacy, as the internet seemingly allow other people to access their information easily(Jones, 2000).Customer don’t always believe privacy will keep customer information confident (Cunningham, 2003).
Increasing Cyber Crimes and Internet Frauds.
The internet frauds and crime have warned customer to thick ten times before adoption of internet transaction. This fear keeps them away from unbelievable advancement of banking. People are very much unwilling to use internet transaction. (Nadir Ali kolachi, 2006).To prevents such frauds. Most banks offer online banking facility has adopted. This ensures that the information exchange between computer and the banks website is completely protected. (SRIRAM, 2005).
Transactions on the internet or any other telecommunication network should be secured to achieve a high level of confidence. In cyberspace, as in the physical world, customers, banks, and merchants need assurances that they will receive the service as ordered or the merchandise as requested, and that they know the identity of the person they are dealing with.
Not with standing all the security that Banks has put into net banking, customers play a very important role in ensuring the overall security of the system and their personal information. The following are simple precautions that customers must take to safeguard security when using net banking:
Don’t disclose your Login Information to anyone.
Don’t share your email account with anyone.
Control access to your PC & Do not use Publicly-shared PCs for Internet Banking.
Don’t store your Login information and password on your browser.
Change your Password on regular basis.
Check your account statements on regular basis.
Benefits of Internet Banking to Consumers:
Some other key benefits of internet banking for customers are as follows (BankAway, 2001; GurÄƒu, 2002). Reduced costs in operating and using the internet banking services. Reduced costs in terms using the different internet banking products and services. Banking services are available 24 hours a day; seven days a week or they are only a mouse click away. No need to go in the bank personally for such matters. Internet banking also provided the facility in payment of utility bills. No need to stand in long queues for these matters .Orr (1999), States that the electronic processing dramatically reduces the cost per transaction. According to DiDio (1998), the average transaction cost at a full service bank is about$1.07. It reduces to $0.27 at an ATM and falls to about a penny if the same transaction is conducted on the web. Also, there are opportunities for banks to present customer bills electronically. The cost of delivering bills electronically is substantially lower than if the bill was in paper form delivered through the mail. Irvine (1999) states that electronic bill presentment costs 40% less than paper delivery. These kinds of cost savings can present customers and banks similar reduced cost of banking and still provide capable and different services.
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Benefits of Internet Banking to Banks:
Banking industry also has different benefits due to the growth of Internet-Banking .Some are mentioned as below. The main benefit for the banking point of view is that internet banking services are better response to the market. The main purpose of every financial organization is to increase the profits for its vendors. Online banking services give ideal chances for increasing the profits. Banks also receive extra profits/amount on transactions finished through internet banking channels. Numerous services and dull tasks have now been fully computerized and in better efficiency and good time usage. The growth of internet banking has much helped the banks in minimizing their overheads charges and service cost. Internet banking has also provided facility to bank in proper records and documentation of the transactions
Objective of the Study:
To study the various study feature offered by internet banks.
To analyze the perception of internet banking customer.
To analyze the perception of internet user who do not use internet banking service.
To look at the prospects of Internet Banking in Pakistan.
Chapter no: 2 – Rationale, Theoretical or Conceptual Background/Foundation
Issues of Internet, e-commerce and e-business utilization in organizations have been discussed from a multiplicity of theoretical perspectives (Boateng and Hinson, 2007). (Turban 2001) in his theory he mentioned that customers frequently do not trust on internet banking for such reasons 1) Security of the system 2) Perceived risk (worries about reliability) 3) Responsiveness 4) Distrust of services provider. According to the studies the adoption of e commerce business to consumer is based on trust and risk. Despite the importance of trust in Internet banking (Quelch and Klein, 1996), few theory-guided empirical research studies have been undertaken to understand the nature of trust, its antecedents, and its consequences in the context of Internet banking. The commitment-trust theory of relationship marketing by (Morgan and Hunt, 1994) also proposes certain variables that contribute to the achievement of trust. According to the many articles the research also explain you the social theory and the trust theory. The research is explaining you both theoretical explanation and empirical validation on the adoption of internet banking. The failures of the internet as a retail distribution channel has been attributed to the lack of trust consumer have in the electronic channel and web merchant (Stewart 1999).. According to Bhattachary el al.(1998), researchers in different disciplines have viewed trust along different dimensions. The role of trust in the relation between dyadic partners involved in transactions(eg Smith and Barclay).Culture also influence on the development of trust in electronic banking.(Doney el al,1998).Stewart(1999) argued that transference is mean by which initial trust is an known object e.g. internet may be established. The transfer of trust/distrust can be studied based on social network theory (Granovetter 1973), which state that informal channels of communication are primary mean disseminating market information when service are difficult to evaluate. Mayer el at (1995) further clarified the relation between trust and risk, trust is willingness to assume risk, while trusting behaviors is the assumptions of risk. By separating effects of trust from those of perceived risk, we may better understand the influences of the adoption internet banking and user and non user behavior.
Theories on Trust in Internet Banking Environment
Trust was found to affect both intended inquiry and intended purchase. Trust was affected by one’s disposition to trust.
Suh & Han (2002)
Trust had a significant effect on intention to use and attitudes toward using Internet banking.
Consumers’ willingness to transact online was influenced by trust, which in turn was affected by familiarity. Familiarity was significant on consumers’ willingness to transact.
Sohail & Shanmugham (2003)
Trust in one’s bank had a significant influence on him or her to use Internet banking. Other factors were Internet accessibility, attitude towards change, computer and Internet access costs, security concerns, ease of use, and convenience.
Teoh & Md Nor (2007)
Perceived security had a significant effect on the intention to use mobile banking. Other factors that affect the intention are perceived usefulness and ease of use.
Md Nor & Pearson (2007)
Trust, relative advantage, and trialability had a significant effect on the intention to use Internet banking.
Chapter no: 3 – Literature Review
Now days, Internet banking (IB) is the most modern and most new service presented by the banks. Robinson (2000) reported that half of the people that have tried online banking services will not become active users. Another author claims that Internet banking is not living up to the hype (Weeldreyer 2002). The transformation from the traditional banking to electronic banking has been an increase change. The evolution of electronic banking started from the use of Automatic Teller Machines (ATMs) and telephone banking (tele-banking), direct bill payment, electronic fund transfer and the revolutionary online banking. Many studies find out the customer point of view on internet banking adoption. Internet banking has become the self-service delivery channel that allows banks to provide information and offer services to their customers with more convenience via the web services technology. It is important to understand the customer’s perception on internet banking. Many banks have implemented Internet banking to offer their customers a variety of online services with more convenience for accessing information and making transactions. Customer satisfaction and customer retention are increasingly developing into key success factors in e-banking (Bauer et al, 2005). The four factors perceived usefulness, perceived ease of use, consumer awareness about internet banking and perceived risks associated with internet banking. ATMs, Tele-Banking, Internet Banking, Credit Cards and Debit Cards have emerged as effective delivery channels for traditional banking products. Internet banking refers to systems that enable bank customers to get access to their accounts and general information on bank products and services through the use of bank’s website, without the intervention or inconvenience of sending letters, faxes, original signatures and telephone confirmations (Thulani et al, 2009; Henry, 2000). It is a process of innovation whereby customers handle their own banking transactions without visiting bank tellers. Online banking is also one of the technologies which are fastest growing banking practices nowadays. Online banking is becoming the indispensable part of modern day banking services. Online banking is time saving (Qureshi et al, 2008). According to Aladwani (2001) different forms of online banking are web-based banking where a customer can access his or her account when he or she uses the Internet; second form of online banking is where a bank customer uses a modem to dial-up to a bank’s server to access his or her bank account. The later type of online banking is known as dial-up banking. Typically the bank has the marketing information about the bank’s products and services on a standalone server. This type of internet banking allows some interaction between the bank’s systems and the customer. This level of internet banking allows bank customers to electronically transfer funds to or from their accounts, pay bills and conduct other banking transaction online. Consumer attitude and adoption of internet banking showed there are several factors predetermining the consumer’s attitude towards online banking such as person’s demography, motivation and behavior towards different banking technologies and individual acceptance of new technology. Service quality, including the provision of convenient/accurate electronic banking service personalization; the provision of friendly and responsive customer service; and the provision of targeted customer services are the main perusing factors to accept online banking system (Qureshi et al, 2008).
Electronic banking has been viewed as an upgrading from previous electronic delivery systems to open new business opportunities for the banking industry (Ebling, 2001).E-business has been continuously growing as a new industry during the last decade and today is widely understood as business conducted through the internet, not only including buying and selling products, but further extended for also serving customers and collaborating with business partners (Van Hoeck, 2001). Some key issues addressed in the recent literature about the e-banking include: customer acceptance and satisfaction, privacy concerns, profitability, operational risks, and competition from non-banking institutions (Boss et al., 2000) In electronic banking delivery systems introduced new facility to the customer is ATM. Automated Teller Machines (ATMs) and telephone transaction processing centres, online banking provides banks a new and more efficient electronic delivery tool (Costanzo, 2000).Now the most recent development of banking sector is wireless banking which is called mobile banking (m-banking). With the combination of two most recent technological advancement internet and mobile phone, a new service (mobile data service) is thus enabled and the first such wireless internet commercial transaction was performed by the banking industry (Barnes and Corbitt, 2003).Today there are some major challenges and issues are facing by electronic banking. First the most important is the security concern (Feinman et al., 1999; Financial Services Security Lab Background, 2001). Customers are feared of share their bank account number online or paying an invoice through internet. Second, challenge facing electronic banking industry is the quality of delivery service including both delivery speed (i.e., short advance time required in ordering) and delivery reliability (i.e., delivery of items/services on time) (Furst et al., 2000), which caused many e-business failures in the earlier dot.com era. Currently there are two different approaches in the e-banking industry: a separate (from its traditional office) internet e-bank (i.e., virtual bank) with all transactions being transacted online, or to add an online banking section to the services already being offered by its major bank office (Hackett, 2000; Hughes, 2003; Sweeney and Morrison, 2004). Both approaches have advantages and issues to be addressed in practice (Daniel and Story, 1997; Beckier et al., 2000; Gulatti and Garino, 2000). American banks had launched their e-banking services among the few first in the international banking field starting as early as 1992 (American Banker, 2000). As a result, many banks, based on their existing 24-hour telephone banking systems, have developed and implemented several important earlier e-banking applications so that their customers are able to pay bills, transfer money among accounts, check account history, download statement information, and computerize their checkbooks online all at easy and around the clock (Graven, 2000). In UK, banks now view e-banking from new distribution channel before to new business models in which e-banking service is considered together with banks’ strategic planning, business process, and product/service package offering (Li, 2002; Brown et al., 2004). As an integral part of the e-business, the e-banking industry has been growing at a rapid pace, to help banks cut costs, increase revenue, and become more convenient for customers (Halperin, 2001). A recent research even investigated the impact of e-banking on building inter-firm relationships within 200 Australian banks and showed that an effective e-banking may enhance inter-firm relationships through improved traditional communications (Rao, 2004). While larger and national banks are currently leading the way in the e-banking forefront, most small and local community banks are reported way behind in this effort – due to the fact that those smaller community banks were in general lack in both financial and technological resources (O’Connell, 2000). Those electronic banking options also generate a higher proportion of their income from nontraditional activities comparing to banks without e-banking operations (Stamoulis, 2000) .Looking forward, most small banks are motivated to develop e-banking services for potential future cost savings and gaining a competitive edge in the competition (Timmons, 2000). Some new e-banking services have gained a growing popularity such as electronic-payments and statement aggregation involving e-mail statements, e-mail alerts, online loan decisions, fraud protection, and inter-bank funds transfer capabilities (Stoneman, 2001). In fact, the most criticized aspect of the current e-banking service is the slow response to customers’ e-requests (Sathye, 1999; Szymanski and Hise, 2000; Beckett, 2000). Customers do not like to be ignored. Under today’s highly competitive market, banks must respond to customers’ requests in their e-banking services more promptly and forcefully (Hewson and Coles, 2001; June and Cai, 2001; Black et al., 2001; Karjaluoto et al., 2002). Risk in the banking industry has always existed, but providing e-banking services actually has increased or modified some traditional risks associated with banking activities, in particular strategic, operational, legal and reputation risks, thereby influencing the overall risk profile of banking (Duran, 2001). Many new e-banking initiatives have aimed to become more customer focused while improving e-banking service quality (Knights and McCabe, 1997).Most smaller and rural community banks do not anticipate a market leading strategy, but rather an inward looking and focusing on supply side strategy (De Moubray, 1991; Shemwell and Yavas, 1998; Durkin and Bennet, 1999).
According to the studies the reasons customers use Internet banking (I-Banking) and whether the use differs across various customer demographics. The emergence of Internet Banking not only changed the way we do banking in all main areas: distribution, production, payment and trading (Llevwellyn, 1997), but also created new customer values in content, infrastructure, and context (Methlie, 1998).The study examined the relation among loyalty and trust.. There are two types of service which are frequently used in internet banking are Checking account balance and Checking bank statements. Electronic commerce is transforming the marketplace by changing firms’ business models and by shaping relationships amongst market actors and by contributing to changes in market structure” (OECD, 1998). .From customers’ point of view Internet Banking refers to “several types of banking activities through which they can request information and carry out most retail banking services such as checking account balances, inter-account transfers, bill-payments, etc, via a telecommunication network (Mukherjee and Nath 2003, p.5). Technological changes are causing banks to rethink their strategies for services offered to customers. Customer trust and loyalty are commanding the attention of all banking institutions (Aladwani, 2001).Trust in the electronic channel is the major determinant of the Internet Banking adoption behavior (Kim and Bipin, 2000) and customer loyalty has been regarded as an important source of sustainable competitive advantage and the main determinant for the success of companies (Zeithaml et al, 1996).
According to the study, Internet Banking is a new conception in Bangladesh. In Bangladesh there are 28 banks that provide internet banking facilities to account user, mostly head quartered in Dhaka only a select few have web pages. The Internet banking applications offer wide benefits to customers and banks and it is banks. Internet Banking is an advantage to the customer customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent. Internet banking means a kind of self-help financial servi
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