ahmed e banking paper 09

Int. J. Electronic Finance, Vol. 3, No. 2, 2009 115

Copyright © 2009 Inderscience Enterprises Ltd.

Recent trends and developments in e-banking in an underdeveloped nation – an empirical study

Jiaqin Yang* and Kh Tanveer Ahmed Management Department Georgia College & State University Milledgeville, GA 31061, USA E-mail: [email protected] E-mail: [email protected] *Corresponding author

Abstract: This paper describes a case study about the major issues and challenges in the development of the electronic banking (e-banking) industry of a relatively underdeveloped nation. This research shows that even in many less developed nations, the application of e-banking can help their local banks reduce operating costs and provide a better and fast service to their customers. The research objectives are to investigate the current trends and developments in e-banking and provide managerial insights for the banking industry in those underdeveloped nations. The collected data are examined through statistical analysis tools. Managerial implications are discussed with suggestions for future research.

Keywords: electronic banking; e-banking; empirical study; developing nations.

Reference to this paper should be made as follows: Yang, J. and Ahmed, K.T. (2009) ‘Recent trends and developments in e-banking in an underdeveloped nation – an empirical study’, Int. J. Electronic Finance, Vol. 3, No. 2, pp.115–132.

Biographical notes: Jiaqin Yang is a Professor of Management at the Georgia College & State University, Milledgeville, Georgia, USA. He received his PhD in Operations Management from Georgia State University. His current research interests include operations strategy, e-business and quality management. He has published in the International Journal of Production Economics, the European Journal of Operations Research, Decision Sciences, the Journal of Computers and Industrial Engineering, Mathematical and Computer Modeling, Integrated Manufacturing Systems, Environment International, the International Journal of Business, Industrial Management and Data Systems, Facilities, Electronic Government, the International Journal of Management and Enterprise Development, as well as numerous professional conference proceedings.

Kh Tanveer Ahmed is currently a graduate student (Master of Accountancy at Georgia College & State University, USA) and will graduate on May 2009.

116 J. Yang and K.T. Ahmed

1 Introduction

E-business has been continuously growing as a new industry during the last decade (Van Hoeck, 2001). The banking industry has been leading this trend in recent years, and now all banking transactions completing through internet applications is sometimes called e-banking. 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 nonbanking institutions (Boss et al., 2000; Smith, 2006; Hwang et al., 2007; Shin, 2008). E-banking has revolutionised the way business is transacted by globalising the business enterprise.

E-banking technologies have proliferated in recent years, and the availability of a wide range of products has led to increasing adoption among consumers. These technologies include direct deposit, computer banking, stored value cards, and debit cards (Servon and Kaestner, 2008). Consumers are attracted to these technologies because of convenience, increasing ease of use, and in some instances cost savings (Anguelov et al., 2004). E-banking, in particular, has grown at impressive rates. Between 1995 and 2003, e-banking increased eightfold (Hogarth and Anguelov, 2004). Between late 2002 and early 2005, use of online banking increased 47%, a clear evidence that e-banking is associated with better household financial management (Smith, 2006).

All businesses, including small and medium scale industries, no matter their geographical locations, are all beneficiaries of e-banking. It encompasses all kinds of commercial transaction that is conducted on an electronic medium, mostly through the internet. E-banking links business to customers no matter their geographical location. It allows companies to make new business contacts from different global business alliances, test new products and services, and make market research and other enquiries all at a minimal cost both financial and otherwise (Shin, 2008).

Smaller community banks, among others, are more interested in the application of e-banking to gain certain competitive edges over their larger counterparts (Yang et al., 2007). In addition to previous e-banking delivery systems, Automated Teller Machines (ATMs) and telephone transaction processing centres, online banking provides banks a new and more efficient electronic delivery tool (Costanzo, 2000). While ATMs were first introduced in early 1980s and initially an attempt to reduce operating costs, telephone call centres were developed in the 1990s to handle simple transactions and provide added customer services from a remote location. E-banking has been viewed as an upgrading from previous electronic delivery systems to open new business opportunities for the banking industry (Ebling, 2001).

This paper describes an empirical study of investigating recent trend and development of the application of e-banking (banking though internet) in a typical developing country – Bangladesh, and its economic impact on local financial institutions. Currently, Bangladesh is far behind in terms of e-banking development and applications. More specifically, while it is a fact that currently many banks in Bangladesh have implemented e-banking services, however, comparing with most developed countries, the e-banking application in Bangladesh is only in its infancy stage and there is a huge gap to be fulfilled with new research and development effort. As such, addressing the current issues and challenges in the development of e-banking in Bangladesh is the primary motivation of this research.

Recent trends and developments in e-banking in an underdeveloped nation 117

2 Literature review

For the past two decades, the banking sector has chosen a new service channel based on the progress of information technology – internet to respond to the changes in customer preferences and needs, increasing competition from non-banks, changes in demographic and social trends, and government deregulations of the financial service sector (Byers and Lederer, 2001). In the search for sustainable competitive advantages in the technological financial service industry, banks have acknowledged the value to differentiate themselves from other financial institutions through new service distribution channels (Daniel, 1999). In addition, customer’s transaction and communication abilities have been improved by the developments of information technology. Information technology enabled electronic channels to perform many banking functions that would traditionally be carried out over the counter (Giannakoudi, 1999). The rise of electronic payments media such as debit and credit cards has caused the value of cheques paid in the USA to fall to – from about $49 billion in 1995 to about $42 billion in 2002 (Gerdes and Walton, 2002). Furthermore, the use of paper cheques has been supplemented step-by-step with e-cheques (i.e., electronic images) allowing banks to have more storage capacity, reduce costs, and improve customer services (Rose and Hudgins, 2005).

Banks have traditionally been in the forefront of harnessing technology to improve their products and services. They have over the time been using electronic and telecommunication networks for delivering a wide range of value added products and services. The range of services and products offered by different banks vary widely both in their contents and sophistication. E-banking provides enormous benefits to consumers in terms of the ease and cost of transactions (Liu, 2008). However, it can be thought of as a service that allows customers to use some types of computers to access account-specific information and possibly conduct transactions from a remote location – such as at home or at the workplace (Saleh and Andrea, 2002).

The growth in e-banking with the increase in the range of interface options available to access online banking solutions has resulted in a steady increase in the number of customers interacting through remote channels to a greater extent than before. In a climate of increasing online competition, banks that have chosen to retain extensive branch networks are re-aligning the roles of staff in these branches and moving towards a relationship-driven sales culture (Durkin, 2007). E-banking has been around for some time in the form of automated teller machine and telephone transactions. More recently, it has been transformed by the internet – a new delivery channel that is fast, convenient, available round the clock, and from whatever the customer’s location (Saleh and Andrea, 2002). E-banking also can increase competition among banks, and allows banks to penetrate new markets and thus expand their geographical reach. Some even see e-banking as an opportunity for countries with underdeveloped financial systems to leapfrog into advanced stages (Gao and Owolabi, 2008). Customer in such countries can access services more easily from banks outside one’s own country through wireless communication systems, which are developing more rapidly than traditional ‘wired’ communication networks (Gao and Owolabi, 2008).

A more recent e-banking development is wireless internet applications of banking sometimes called m-banking (mobile banking) (Choi et al., 2006; Scornavacca and Hoehle, 2007). With the combination of two most recent technological advancements – internet and mobile phone, a new service (mobile data service) is thus enabled and


the first such wireless internet commercial transaction is performed by the banking industry (Barnes and Corbitt, 2003). It is believed that m-banking will provide another new channel for banking services, especially for certain remote areas where online internet is still unavailable. Strategic implications and customer perception of m-banking services are explored (Laukkanen and Lauronen, 2005) with a focus on the consumer value creation and a better understanding about the customer-perceived value of m-banking services. For instance, mobile internet service has been quite popular in Japan (over 60 millions users in 2003) especially for those young and single (i.e., unmarried) consumers (Scornavacca and Barnes, 2004). A summarised literature review is described below.

2.1 Electronic banking

Electronic distribution channels provide alternatives for faster delivery of banking services to a wider range of customers (Kaleem and Ahmad, 2008). E-banking is the newest delivery channel of banking services. The definition of e-banking varies amongst researchers partially because e-banking refers to several types of services through which a bank’s customers can request information and carry out most retail banking services via computer, television or mobile phone (Mols, 1998; Sathye, 1999). E-banking can also be defined as a variety of the following platforms:

• internet banking (or online banking)

• telephone banking

• TV-based banking

• mobile phone banking

• PC banking (or offline banking) (Kolodinsky et al., 2004).

Most of the consumers who start banking online do it because they need to pay bills frequently and would like to do it with minimum effort. Besides that, people use the internet banking to keep an eye on their money matters, view their account balance and check receiving payments from other parties. E-banking technologies can be classified as either ‘passive’ or ‘active’ (Kolodinsky et al., 2004). Passive technologies such as direct deposit do not require behavioural changes on the part of the consumer. These innovations are therefore more easily spread to the mainstream. Active technologies on the other hand, require new behaviour and are therefore more challenging to propagate (Servon and Kaestner, 2008). E-banking requires perhaps the most consumer involvement, as it requires the consumer to maintain and regularly interact with additional technology such as a computer and internet connection (Kolodinsky et al., 2004).

2.2. Different forms of electronic banking

The terms ‘PC banking’, ‘online banking’, ‘internet banking’, ‘telephone banking’ or ‘mobile banking’ refer to a number of ways in which customers can access their banks without having to be physically present at the bank branch. E-banking may be understood as a term that covers all these ways of banking business electronically (Leow and Bee, 1999):


• Tele-banking: Tele-banking service is provided by phone. To access an account it is required to dial a particular telephone number and there are several options of services.

• PC-banking: The increasing awareness of the importance of computer literacy has resulted in increasing use of personal computers through the entire world. The term ‘PC-banking’ is used for banking business transacted from a customer’s PC, i.e., customers can use their personal computers at home or at their office to access their accounts for transactions by subscribing to and dialling into the banks’ intranet proprietary software system using password.

• Internet banking: Internet banking would free both bankers and customers of the need for proprietary software to carry on with their online banking transactions. Customer behaviour is changing rapidly. Now the financial service is characterised by individuality, independence of time and place and flexibility. These facts represent huge challenges for the financial service providers. So the internet is now considered to be a ‘strategic weapon’ for them to satisfy the ever-changing customers’ demand and innovative business needs.

• Mobile banking (m-banking): A more recent e-banking development is wireless internet applications of banking – sometimes called m-banking. With the combination of 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).

2.2.1 Importance of e-banking

Thornton and White (2001) compared several electronic distribution channels available for banks in the USA and concluded that customer orientation – towards convenience, service, technology, change, knowledge about computing and the internet – affected the usage of different channels. Howcroft et al. (2002) found that the most important factors encouraging consumers to use online banking are lower fees, less paperwork, and reduced human errors, which subsequently minimise disputes. Recent research also suggests that increased use of online banking and bill paying can actually decrease the occurrence of identity theft by taking personal information outside the mailbox and eliminating a paper trail (Stafford, 2004). Gerrard and Cunningham (2003) found a positive correlation between convenience and online banking and remarked that a primary benefit for the bank is cost saving and for the consumers a primary benefit is convenience.

E-banking does not only encompass the way one shops over the internet, but also the ways one carries out banking transactions. This allowed customers, more independence in the choice on where and when to bank. It is an obligation for banks to apply better strict security levels due to the many kinds of threats that are recently identified with these alternative channels (Smith, 2006). E-banking provides a number of advantages for both the banks and their customers:

• It removes geographical limitations for small and medium size banks, thereby paving ways for international operation without limits.

• It has no time limitation, i.e., banking transactions may be performed throughout the day, week and from any place they can have access to the internet.


• It provides efficient cash management for interest optimisation.

• It provides convenience in terms of the capital, labour time and all the resources needed to make a transaction.

• It has assisted banks to increase in data collection, data management, and financial engineering that have improved the ability of potential creditors to assess the creditworthiness of potential borrowers and to price the risk associated with those borrowers through standardised mechanisms such as credit scoring (Ziqi and Michael, 2003; Carlson et al., 2000).

E-banking has emerged as a significant and rapidly growing component of the world economic exchange. Through e-banking the world economic exchange has been reduced to a tiny global village in terms of its information capacity and the resources it holds which can be accessed by anybody from anywhere in the globe (Hwang et al., 2007).

2.2.2 Current issues of e-banking

There are several major challenges and issues facing the e-banking industry today. First, and perhaps most important is the security concern (Feinman et al., 1999; Ziqi and Michael, 2003). Customers are certainly concerned of giving their bank account information online or paying an invoice through internet. Another challenge facing e-banking industry and the e-business in general 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. Limited online payment options have resulted in many customers to drop out in the last stage of the purchasing process due to dissatisfaction and inconvenience. Finally, the issue of customer unfamiliarity with the internet, which is prominent among senior citizens, has recently caught some attention, because these customers believe that they are left at a disadvantageous position and become very reluctant in doing business online (Yang et al., 2007). 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).

This paper describes an empirical study of investigating recent trend and development of the application of e-banking (banking through internet) in a typical developing country – Bangladesh – one of the less-developed developing countries in the world. While the e-banking application has advanced significantly during recent years, especially in the developed nations and most emerging new economic power nations (like China, South Korea, etc.), but in comparison, the development of e-banking application is way behind in many relatively poor and underdeveloped nations (like many nations in South Asia and Africa) (Gao and Owolabi, 2008). Currently, Bangladesh is far behind in terms of e-banking development and applications, though many banks in Bangladesh have been implementing e-banking during recent years. It is believed that this is a typical underdeveloped country and its current e-banking application should be quite representative to other similar nations.


The primary objectives of this research are:

• to investigate the current state of e-banking development in Bangladesh

• to examine if the introduction of e-banking during last few years has improved the efficiency and effectiveness of the bank’s operations

• to evaluate whether the implemented e-banking system has been able to help in the curtailment of fraud in commercial banks of Bangladesh

• to highlight the challenges and dilemmas that the e-banking system is currently facing in Bangladesh.

3 Research methodology

The original data for this research are collected through a comprehensive web-based questionnaire survey (see Appendix), as well as some interviews with several bankers from selected banks in Bangladesh. As shown in Appendix, the questionnaire items are designed to capture bankers’ perceptions regarding e-banking, demographic features, strategic considerations, operating issues, its effects on banks, customer-bank relationships, technology considerations, and services offered through e-banking system.

This study focuses on the effect of e-banking on banks’ strategic and operational dimensions. Strategic issues include such factors as threats posed by e-banks and the need to offer internet banking; operational issues include providing better customer service, lowering transaction costs, and providing additional financial services to customers. A set of items was generated to gauge banks’ perceptions on the strategic and operational impact of internet banking. Moreover, the questionnaire also focused on some related demographic features which describe the size of the banks in terms of assets and their customers. Similarly items are crafted to assess the benefits and services the customers are getting by using the e-banking, as well as the technological considerations.

In the survey, those operational and strategic questions and benefit of the e-banking are measured by the normally used five-point Likert scale (1 = strongly disagree; 5 = strongly agree). In comparison, to make the questions easy to answer by survey participants, those technological items are designed with simple ‘Yes’ or ‘No’ choices. For those items which may have multiple selections (like demographic and current available e-banking services) the questionnaire was designed using ‘Check all that apply’ option.

After an extensive and persistent selection effort in the city of Dhaka, Bangladesh, there are 18 banks randomly selected to participate in this research. The survey results are discussed in the next section.

4 Result analysis

The results of Questions 1–3 of the survey are presented in Figures 1 and 2, showing the basic demographic information pertaining to the e-banking in Bangladesh. From Figure 1, it can be seen that the asset size of the commercial banks in Bangladesh is not very healthy. Most of the banks’ asset fall into the category of less than $20 million


range. Only two banks’ total asset is more than $100 million which represent that most of the commercial banks in Bangladesh are not very healthy in terms of their asset size. It may be surprising to see in Figure 2 that a huge majority of customers in Bangladesh are either not familiar with the e-banking services and not using it at all or using e-banking rarely – there are 50% of customers with ‘Less than 25%’ e-banking services usage followed by 44% customers under ‘26% to 50%’ e-banking practice category. These data clearly indicate that although e-banking service has been offered by most of the commercial banks in Bangladesh, but a majority of people are either not familiar with the system or not willing to use the e-banking service.

Figure 1 Total assets of surveyed banks (see online version for colours)

Total Asset of Banks

39%

28%

22%

11%

Less than $20 millionBetween $20 and $30 millionBetween $50 and $99 millionMore than $100 million

Figure 2 Percentage of current bank customers using e-banking services (see online version for colours)

Percentage of customers using the E-banking system

50%44%

6% 0%

Less than 25%26% to 50%51% to 75%0ver 75%

The results about the e-banking operational issues are summarised in Table 1. It can be seen from Table 1 that almost 90% of the banks reported that the benefits of internet banking outweigh the associated costs. This certainly should be viewed as a positive sign from the business perspective, that all banks in a underdeveloped nation (like Bangladesh) have been convinced to believe in the benefit and the potential from the development of e-banking services – which could be the primary motivation for those banks in their future e-banking development. In addition, the participating banks


reported benefits in the following areas: increases in the customer base (72.22%), improvements in customer service (88.89%), lower transaction costs (83.33%), opportunities to offer additional services (e.g., insurance, brokerage services, credit card applications) (94.44%), secured the customer’s personal information (83.33%), and increased customer satisfaction (88.89%). All are remarkable improvements from banks’ operational perspective. Clearly, it is evidenced that even in an underdeveloped nation (like Bangladesh), the banks offering e-banking services will have much more competitive advantages compared to their counterpart who do not offer e-banking services. However, only 27.78% of the respondents believed that customer accounts would be less costly to maintain through internet banking. The survey also revealed that more customer training/education is needed (61.11%) in promoting e-banking services.

Table 1 Result summary of operational issues

Operational measures of e-banking Mean % Agreeing % Neutral % Disagree

1. Benefit outweigh the cost 4.28 88.89 11.11 0

2. Allows banks to increase customer base 3.61 72.22 16.67 11.11

3. Improves customer service 4.33 88.89 11.11 0

4. Lowers transaction costs 3.78 83.33 0 16.67

5. Offers opportunities to provide additional services

4.22 94.44 5.56 0

6. Accounts are less costly to maintain 2.72 27.78 27.78 44.44

7. More customer training/customer education is needed in promoting e-banking services.

3.67 61.11 27.78 11.11

8. E-banking services will enhance your competitive position in the market.

4.17 83.33 16.67 0

9. Your e-banking services increased the degree of customer satisfaction.

3.83 88.89 11.11 0

10. Your bank believes that the customer’s personal information security is better now than it was before.

4.00 83.33 16.67 0

Notes: Items are measured using a five-point Likert scale (1 = Strongly Disagree; 5 = Strongly Agree).

Table 2 displays the result from the survey pertaining to the strategic considerations. For example, about half (50%) of surveyed banks believed that developing e-banking services is essential for a bank’s survival in the marketplace and thus mandatory in order to compete effectively. In addition, 39% of banks reported that banks not offering internet banking services would lose customers to other banks and the rest (61%) responded neutrally about this strategic issue. All surveyed banks (100%) agreed that internet banking improves bank’s efficiency so that they can offer better services. Furthermore, a majority (89%) of the respondents said that they have established e-banking into their banks’ future strategic planning. The same amount of respondents (89%) also believed that using the e-banking system gives their banks an impression of a progressive bank in the market. All the above confirm the fact that has been observed in the development of e-banking industry in the current developed nations.


Table 2 Result summary of strategic considerations

Strategic considerations of e-banking Mean % Agreeing % Neutral % Disagree

1. Essential for banks’ survival 3.50 50 38.89 11.11

2. Gives the impression of a cutting edge bank

3.56 88.89 11.11 0

3. Important to compete effectively in the near future

4.11 88.89 11.11 0

4. Banks not offering internet banking will lose their potential customers

3.39 38.89 61.11 0

5. Improve bank’s efficiency so that bank can offer better services

4.28 100 0 0

6. Your bank has established e-banking into your bank’s future strategic planning.

4.17 88.89 11.11 0


For the questions towards assessing the impact of e-banking on the bank’s customers, the results are displayed in Table 3. As using e-banking implies to the customers the potential reduction of physical visits to the banks, easy online payment, viewing the statement online anytime, and accessing on the account around the clock, positive responses are expected. Not surprisingly, as seen in Table 3, a majority of surveyed banks (77.78%) view that e-banking service has significantly benefited their customers. For instance, over 88.89% indicated that the availability of e-banking reduced the frequency of customer visits to a physical bank, which in turn saves time and money for both customers and bankers. Most surveyed banks (72.22%) responded that customers can access to accounts around the clock is one of the most important features of e-banking to the customers. Customers can view the monthly statement and make payment online is viewed another important benefit (77.78%). A majority of bankers (55.56%) believe that customers enjoy their benefit by using the e-banking, and about 72.22% agree that customers are secured in using e-banking.

Table 3 Result summary of e-banking benefits to customers

E-banking benefits to customers Mean % Agreeing % Neutral % Disagree

1. Customers are getting substantial amount of benefits

3.89 77.78 22.22 0

2. Reduces the frequency of customer visits to a physical bank

4.06 88.89 11.11 0

3. Customers can view online monthly statement and make payment online

3.94 77.78 22.22 0

4. Customers enjoy their benefits by using the e-banking

3.67 55.56 44.44 0

5. Customers can access to accounts around the clock

3.94 72.22 22.22 5.56

6. Customers are secured in using e-banking 4.00 72.22 22.22 5.56



Technological issues of e-banking development are also part of interest in this research, and the results from the survey about those technology related considerations are displayed in Table 4. Some important implications can be learned from Table 4, for example, a majority of the banks (78%) reported that they are lack of high quality IT professionals to design and develop their e-banking systems, a clear signal for the lack of higher education institutions and training capacity in a least-developed country like Bangladesh. That is confirmed when over half (57%) indicate that they had difficulties in finding and recruiting talented high quality IT individuals to run their e-banking operations. In addition, only half (50%) of the banks believe that government is providing enough support to train more qualified IT professional in order to meet this demand for e-banking development (and other high technology industries). And consequently, only 28% of banks agree that maintaining such an e-banking system is an easy task. The results above clearly indicate that while the shortage of talented IT professionals in the information technology and specifically in the e-commerce area may be a major short-term obstacle in the further development of e-banking in Bangladesh, but to build more modern up-to-date high quality higher education institutions and the foundation to improve the educational level of general population by the government and the society as a whole should be a real long-term solution.

Table 4 Technological considerations in e-banking

Technological considerations of e-banking Yes (%) No (%) Total (%)

Deficiency of IT Professionals 78 22 100

Difficulty in Recruiting Qualified Professionals 57 43 100

Government Support 50 50 100

Technological Constraints 28 72 100

The final two sections of the survey are focused on the current available e-banking services and the areas to assist potential customers by the banks in promoting e-banking system. The results about the current available e-banking services (provided by the surveyed banks) are displayed in Figure 3. It is interesting to see that in this research, less than half of surveyed banks (39%) currently offer online enquiry and transfers service – the very basic service of any e-banking systems in the developed nations. While over 50% of selected banks (61.11%) provide online billing payment service, may be a positive sign. In contrast, only one-third of banks (33.33%) allow online deposit account service. As expected, most advanced e-banking services such as: online small business loans and online trust fund are all very limited (less than 5%), quite insignificant. The above results confirm the presumption of this research that there is a huge gap between those well developed and new emerging economic powers (like the USA, European nations, and China) and those least-developed nations (like Bangladesh) in terms of the development and application of e-banking services, as well as other high-tech industries. While an international help from world’s developed nations certainly will be a big plus, but the policies and appropriate effort of the governments of those least-developed nations will be the key to reduce this gap in the foreseeable future.


Figure 3 List of e-banking services currently provided (see online version for colours)

E-banking services

27%

42%0%

4%

4%

0%

23%

Online inquiry and transfers

Online bill-pay

Online mortgage application

Online small business loans

Online trust funds

Online investment and optionsmanagementOnline deposit accounts

In terms of e-banking application in a least-developed nation, an appropriate education and training of potential customers is another critical area. As seen in Figure 4, in this research, a positive sign is that a majority of surveyed banks currently provide some kind of help to their customers. These assistances include employees’ assistance, personal service over telephone, e-mailed instructions, website ‘help’ capabilities, etc. More specifically, about 45% of surveyed banks offer assistance to their customers through e-banking brochures, 11% of banks offer customer training, and another 11% have online e-banking demos to their customers. A conclusion here is that those efforts should be enhanced further in the future e-banking development in those least-developed nations.

Figure 4 Available assistance to e-banking customers (see online version for colours)

Help or Assistance provided to customers

30%

11%11%

48%BrochuresTrainingOnline banking demoOthers


5 Summary and future research

This paper describes an empirical study about the major issues and challenges in the development of e-banking applications faced in relatively underdeveloped nations – based on a case study in a typical underdeveloped nation – Bangladesh. The research objective is to investigate the current trend and development of e-banking industry and therefore to provide managerial insights for the banking industry in those underdeveloped nations. The primary data for this study are collected through a carefully designed survey questionnaire, and in the survey, over 18 commercial banks in this underdeveloped nation are randomly selected. This research shows that even in a least-developed developing nation, the application of e-banking can help their local banks to reduce related operating costs and provide a better and fast service to their customers.

However, this research also reveals that there is a huge gap between those well developed and new emerging economic powers (like the USA, European nations, and China) and those least-developed nations (like Bangladesh) in terms of development and application of e-banking services. For example, there is still a huge population in these least-developed nations are either not familiar with the e-banking services and not using it at all, although e-banking service has been offered by local commercial banks. In addition, there is a large shortage in those least-developed nations in terms of high quality IT professionals to design, develop, and operate their e-banking systems. A learned implication is that reducing such a shortage of talented IT professionals in the information technology through high quality training may be a short-term answer to this challenge in the further development of e-banking application, but to develop up-to-date high quality higher education institutions and the foundation to improve the educational level of general population by the government and the society (as a whole) should be a real long-term solution. To realise the above objective, while an international help (especially from those developed nations) will be a big plus, but the policies and commitments of the governments of those least-developed nations will be the key to the expected success.

This research has some limitations. First, due to the time constraint, a larger sample size was not obtained. Furthermore, the sample did not include those working in the government-owned banks in Bangladesh. In addition, in order to avoid a very lengthy survey questionnaire, some important and related e-banking issues (i.e., specific technological obstacle) are not covered in the designed questionnaire.

References

Anguelov, C.E., Marianne, A.H. and Hogarth, J.M. (2004) ‘U.S. consumers and electronic banking: 1995–2003’, Federal Reserve Bulletin, Vol. 90, Winter, pp.1–18.

Barnes, S.J. and Corbitt, B. (2003) Int. J. of Mobile Communications, Vol. 1, No. 3, pp.273–288.

Boss, S., McGranahan, D. and Mehta, A. (2000) ‘Will the banks control online banking?’, McKinsey Quarterly, pp.70–77.

Byers, R.E. and Lederer, P.L. (2001) ‘Retail banking service strategy: a model of traditional, electronic, and mixed distribution choices’, Journal of Management Information Systems, Vol. 18, No. 2, pp.133–156.


Carlson, J., Furst, K., Lang, W.W. and Nolle, D.E. (2000) ‘Internet banking: market developments and regulatory issues’, in The New Economy: What Has Changed, and the Challenges for Economic Policy, Society of Government Economists Conference, Washington, DC, pp.1–33.

Choi, Y.B., Crowgey, R.L., Price, J.M. and VanPelt, J.S. (2006) ‘The state-of-the-art of mobile payment architecture and emerging issues’, Int. J. Electronic Finance, Vol. 1, No. 1, pp.94–103.

Costanzo, C. (2000) ‘Pioneer internet-only bank has a new strategy’, American Banker, Vol. 165, No. 19, pp.1–2.

Daniel, E. (1999) ‘Provision of electronic banking in the UK and Ireland’, International Journal of Bank Marketing, Vol. 17, No. 2, pp.72–82.

Durkin, M. (2007) ‘On the role of bank staff in online customer purchase’, Marketing Intelligence & Planning Journal, Vol. 25, No. 1, pp.82–97.

Ebling, T. (2001) ‘The economics of online banking’, Target Marketing, Philadelphia, Vol. 24, No. 2, pp.67–78.

Feinman, T., Goldman, D., Wong, R. and Cooper, N. (1999) ‘Security basics: a whitepaper’, http://islab.oregonstate.edu/koc/ece478/notes/security101.pdf.

Furst, K., Lang, W.W. and Nolle, D. (2000) ‘Internet banking: developments and prospects’, Working Paper 2000–9, Office of the Comptroller of the Currency, Economic and Policy Analysis.

Gao, P. and Owolabi, O. (2008) ‘Consumer adoption of internet banking in Nigeria’, Int. J. Electronic Finance, Vol. 2, No. 3, pp.284–299.

Gerdes, G.R. and Walton, J.K. (2002) ‘The use of checks and other noncash payment instruments in the United States’, Federal Reserve Bulletin, pp.360–370.

Gerrard, P. and Cunningham, J.B. (2003) ‘The diffusion of internet banking among Singapore consumers’, International Journal of Bank Marketing, Vol. 21, No. 1, pp.16–28.

Giannakoudi, S. (1999) ‘Internet banking: the digital voyage of banking and money in cyberspace’, Information and Communications Technology Law, Vol. 8, No. 3, pp.205–243.

Hackett, J. (2000) ‘Gauging prospects of net mortgages: the health of the online banking sector may be the canary in the mineshaft’, Mortgage Technology, Vol. 28, March, pp.12–20.

Hogarth, J.M. and Anguelov, C.E. (2004) ‘Are families who use e-banking better financial managers?’, Financial Counseling and Planning, Vol. 15, No. 2, pp.61–78.

Howcroft, B., Hamilton, R. and Hewer, P. (2002) ‘Consumer attitude and the usage and adoption of home-based banking in the United Kingdom’, The International Journal of Bank Marketing, Vol. 20, No. 3, pp.111–121.

Hughes, T. (2003) ‘Marketing challenges in e-banking standalone or integrated?’, Journal of Marketing Management, Vol. 19, pp.1067–1085.

Hwang, H., Chen, R. and Lee, J. (2007) ‘Measuring customer satisfaction with internet banking: an exploratory study’, Int. J. Electronic Finance, Vol. 1, No. 3, pp.321–335.

Kaleem, A. and Ahmad, S. (2008) ‘Bankers’ perceptions of electronic banking in Pakistan’, Journal of Internet Banking and Commerce, Vol. 13, No. 1, pp.23–36.

Kolodinsky, J.M., Hogarth, J.M. and Hilgert, M.A. (2004) ‘The adoption of electronic banking technologies by US consumers’, International Journal of Bank Marketing, Vol. 22, No. 4, pp.233–241.

Laukkanen, T. and Lauronen, J. (2005) ‘Consumer value creation in mobile banking services’, Int. J. Mobile Communications, Vol. 3, No. 4, pp.325–338.

Leow, H. and Bee, H. (1999) ‘New distribution channels in banking services’, Bankers Journal Malaysia, Vol. 5, No. 1, pp.45–56.

Liu, C.C. (2008) ‘The relationship between digital capital of internet banking and business performance’, Int. J. Electronic Finance, Vol. 2, No. 1, pp.18–30.


Mols, N. (1998) ‘The behavioral consequences of PC banking’, International Journal of Bank Marketing, Vol. 16, No. 5, pp.195–201.

Rose, P.S. and Hudgins, S.C. (2005) Bank Management and Financial Services, New York: McGraw-Hill Irwin.

Saleh, M.N. and Andrea, S. (2002) ‘Challenges of the “e-banking revolution”’, A Quarterly Magazine of International Monetary Fund (IMF), Vol. 39, No. 3, pp.34–56.

Sathye, M. (1999) ‘Adoption of internet banking by Australian consumers: an empirical investigation’, International Journal of Bank Marketing, Vol. 17, No. 7, pp.324–334.

Scornavacca, E. and Barnes, S.J. (2004) ‘M-banking services in Japan: a strategic perspective’, Int. J. Mobile Communications, Vol. 2, No. 1, pp.51–66.

Scornavacca, E. and Hoehle, H. (2007) ‘Mobile banking in Germany: a strategic perspective’, Int. J. Electronic Finance, Vol. 1, No. 3, pp.304–320.

Servon, L.J. and Kaestner, R. (2008) ‘Consumer financial literacy and the impact of online banking on the financial behavior of lower-income bank customers’, Journal of Consumer Affairs, Vol. 42, No. 2, pp.271–305.

Shin, K.H. (2008) ‘Is e-banking a competitive weapon? A causal analysis’, Int. J. Electronic Finance, Vol. 2, No. 2, pp.180–196.

Smith, A.D. (2006) ‘Exploring security and comfort issues associated with online banking’, Int. J. Electronic Finance, Vol. 1, No. 1, pp.5–17.

Stafford, M.R. (2004) ‘Identity theft: laws, crimes, and victims’, Journal of Consumer Affairs, Vol. 38, No. 2, pp.201–203.

Sweeney, A. and Morrison, M. (2004) ‘Clicks vs. bricks: internet-facilitated relationships in financial services’, Int. J. Internet Marketing and Advertising, Vol. 1, No. 4, pp.350–370.

Thornton, J. and White, L. (2001) ‘Customer orientations and usage of financial distribution channels’, The Journal of Service Marketing, Vol. 15, No. 3, pp.168–185.

Van Hoeck, R. (2001) ‘E-supply chains – virtually non-existing’, Supply Chain Management: An International Journal, Vol. 6, No. 1, pp.21–28.

Yang, J., Whitefield, M. and Boehme, K. (2007) ‘New issues and challenges facing e-banking in rural areas: an empirical study’, Int. J. Electronic Finance, Vol. 1, No. 3, pp.336–354.

Ziqi, L. and Michael, T.C. (2003) ‘Challenges to internet e-banking’, Communications of the ACM Archive: Mobile Computing Opportunities and Challenges, Vol. 46, No. 12, pp.248–250.


Appendix

Questionnaire about e-banking in Bangladesh

E-banking Please refer to all banking activities/transactions through internet for this research

Demographic issues Responses (Please select only one for each question below)

Internet banking

1. What are the total assets of your bank? [ ] Less than $20 million

[ ] Between $20 and $30 million

(Small vs. Large) [ ] Between $50 and $99 million

[ ] More than $100 million

[ ] Less than 25%

[ ] 26% to 50%

2. Based on your estimate, how many of your customers have been using the e-banking services from your branch?

[ ] 51% to 75%

[ ] Over 75%

[ ] Less than 500

[ ] 501 to 2000

3. Based on your estimate how many total numbers of customers you have in your branch?

[ ] 2001 to 5000

[ ] 5001 to 8000

[ ] 8001 to 10 000

[ ] Over 10 000

Operational issues

Strongly Agree

(5) Agree

(4) Neutral

(3) Disagree

(2)

Strongly Disagree

(1)

Please rank the following statement with 5-Strongly Agree; 4-Agree; 3-Neutral; 2-Disagree; 1-Strongly Disagree.

Internet banking

4. Benefit outweigh the cost

5. Allows banks to increase customer base

6. Improves customer service

7. Lowers transaction costs

8. Offers opportunities to provide additional services

9. Accounts are less costly to maintain

10. More customer training/customer education is needed in promoting e-banking services.

11. E-banking services will enhance your competitive position in the market.

12. Your e-banking services increased the degree of customer satisfaction.

13. Your bank believes that the customer’s personal information security is better now than it was before.


Questionnaire about e-banking in Bangladesh (continued)

Strategic issues

Strongly Agree

(5) Agree

(4) Neutral

(3) Disagree

(2)

Strongly Disagree

(1)

Please rank the following statement with 5-Strongly Agree; 4-Agree; 3-Neutral; 2-Disagree; 1-Strongly Disagree.

Internet banking

14. Essential for banks’ survival

15. Gives the impression of a cutting edge bank

16. Important to compete effectively in the near future

17. Banks not offering internet banking will lose their potential customers

18. Improve bank’s efficiency so that bank can offer better services

19. Your bank has established e-banking into your bank’s future strategic planning.

Benefit of the e-banking to the customers

20. Customers are getting substantial amount of benefits

21. Reduces the frequency of customer visits to a physical bank

22. Customers can view online monthly statement and make payment online

23. Customers enjoy their benefits by using the e-banking

24. Customers can access to accounts around the clock

25. Customers are secured in using e-banking


Questionnaire about e-banking in Bangladesh (continued)

Technological issues Yes (1) No (2)

Please check the following statement with 1-Yes; 2-No

Internet banking

26. Do you believe that you have the deficiency of qualified IT professional to run the e-banking?

27. If your answer to question number 28 is yes, do you have the difficulty to recruit enough qualified professional?

28. Do you believe that government is supporting to generate more and more qualified IT professional?

29. Is e-banking technologically easy to maintain?

Current e-banking services provided Responses (Please check all that apply)

Internet banking

[ ] Online inquiry and transfers 30. Does your bank currently offer any of the following new services? [ ] Online bill-pay

[ ] Online mortgage application

[ ] Online small business loans

[ ] Online trust funds

[ ] Online investment and options management

[ ] Online deposit accounts

[ ] Online cheque order 31. Does your bank currently offer any of the following new services? [ ] Online order of travellers cheques

[ ] Online money order

[ ] Online order of traveller’s cheques

[ ] Online money order

[ ] E-signature

32. What kind of help or assistance is offered to your e-banking customers?

[ ] Brochures

[ ] Training

[ ] Online banking demo

[ ] Others (e.g., employee assistance, personal service over the telephone, e-mailed instructions, website ‘help’ capabilities)

ahmed e banking paper 09

Documents

ebanking technologies

banking transactions

application of e

introduction ebusiness

operations management

georgia state university

industrial management

recent trends