e-banking in transition economies- the case of romania

8/4/2019 E-Banking in Transition Economies- the Case of Romania

1/17

E-banking in transition economies:

The case of RomaniaReceived (in revised form): 13th November, 2001

Ca lin Gura uspecialises in the areas of international marketing, Internet marketing and high technology marketing. He is a Junior Fellow of

the World Academy of Art and Science and a Fellow of the Salzburg Seminar. He has published more than 20 papers in

national and international journals, on international marketing, Internet marketing and Internet strategies and biotechnology

business. Since September 2000 he has been Lecturer in Marketing at the School of Management, Heriot-Watt University,

Edinburgh.

Abstract Internet banking is one of the newest Internet technology applications, which

promises multiple benefits both for the financial institutions and for clients. In the last

five years a large number of banks have launched websites, offering online banking

services. While the implementation and functioning of these digital systems seem to be

relatively smooth in the developed economies, the situation may be different in countries

with economies in transition. The present paper investigates and analyses the specific

conditions of an economy in transition (Romania), and the appropriate strategies for the

implementation and use of e-banking services.

Keywords E-banking, transition economies, Romania

INTRODUCTION

The explosive development of the Internet

is following three main directions:

1 increased penetration of the Internet, in

terms of number of connection lines

and/or users

2 increased richness of the Internet, in

terms of information

3 increased diversification of the Internet,

in terms of applications.

One of the most promising newapplications of Internet technology is

Internet banking. Exploiting the new

communication/transaction channels

offered by the Internet, in the last five

years the number of bank websites has

increased rapidly. At present there are

available online more than 1,500 sites of

banks from all over the world. The

majority of banks with Internet presence

are from the USA, while in Europe thelargest number of banking websites are in

the UK, Germany, Spain, Italy and

France.

Despite the growing interest in the

introduction and development of Internet

banking, there is little research being done

on the implementation of Internet banking

in transition economies. Most of the papers

dealing with this subject only present

general information without attempting to

analyse primary and secondary data in a

systematic way (see www.efinance.ro).These countries, many of them with a

fairly developed financial and technological

infrastructure, experience specific market

conditions in terms of knowledge,

technological abilities, business ethics and

Internet regulations, as well as consumer

cultural and economic differences. Because

of this, the implementation strategy of

Journal of Financial Services Marketing Vol. 6, 4, 362378 # Henry Stewart Publications 1363-0539 (2002)362

Ca lin Gura uLecturer in Marketing, Schoolof Management, Heriot-WattUniversity, Riccarton,Edinburgh, EH14 4AS, UK.Tel: +44 (0)131 451 3587;Fax: +44 (0)131 451 3296;e-mail: [email protected]


2/17

online banking, which is straightforward

in a developed economy, might be

different and more difficult in a developing

country, requiring specific objectives and

additional costs.

This paper attempts to present andanalyse the situation of e-banking in

Romania, using this example to identify

the procedures and criteria which may

influence the introduction of a successful

e-banking system in transition economies.

ECONOMIES IN TRANSITION:

ROMANIA

The end of the 1980s and the beginning of

the 1990s witnessed dramatic changes inthe social, political and economic structure

of Europe.2 The Central and Eastern

European countries have eliminated their

communist regimes and have started their

transition process towards a market

economy and political democracy. During

the last 11 years enormous changes have

been experienced in all the countries of the

former Eastern bloc. At present, in most

countries of Central and Eastern Europe

there are democratically elected

governments which are committed toestablishing market economies based on

pluralist property forms and free

competition. These reforms have been

hindered by high levels of inflation,

unemployment and economic instability

determined by the restructuring of the

national economic systems. As expected,

the pace and the success of reforms is not

similar in all these countries.3

While Romania is often portrayed as a

poor country, this image does not do

justice to its large development potential.

With over 22 million inhabitants,

Romania has the second largest population(after Poland) in Central and Eastern

Europe, and a large stock of skilled

labour.2,3 It also has a generous

endowment of natural resources, notably

including energy and agricultural land.

Economic conditions in some areas are

comparable with those of more advanced

countries in the region. Romania has also

experienced some periods of rapid growth

and economic prosperity in the past.4,5

Romania remained excluded from theeconomic reform debate which

characterised the 1980s in other socialist

countries. The transition shock was,

therefore, particularly great.6 In two years,

the GDP fell by around 20 per cent and

industrial output by more than 50 per

cent.6 In the immediate outset of transition,

Romania not only lost most of its former

COMECON market, but was also affected

by the UN sanctions against other

traditional export markets such as Iraq and

the former Yugoslavia. A gradualistapproach to structural reforms was adopted

by Romanian governments. This strategy

was intended to minimise the social costs of

transformation of the previous economic

and institutional structures. But, the results

of the transition process revealed that this

was not a successful approach to reform in

Romania.6

Table 1 Main macroeconomic indicators7

Indicators 1991 1992 1993 1994 1995 1996 1997 1998 1999

GDP at constant prices(% change) 12.9 8.8 1.5 3.9 7.1 3.9 6.1 5.4 3.2

GDP per capita (US dollars) 1,187 857 1,159 1,324 1,573 1,437 1,521 1,843 1,515Inflation (change in year-endretail / consumer price levelin %)

223 199 296 62 28 57 152 41 55

Exchange rate (lei / USdollar end year) 189 460 1,276 1,767 2,578 4,035 8,023 10,950 18,255

# Henry Stewart Publications 1363-0539 (2002) Vol. 6, 4, 362378 Journal of Financial Services Marketing 363

E-banking in transition economies: The case of Romania


3/17

The country has experienced high levels

of inflation, a slight increase in the GDP

per capita, and a constant devaluation of

the national currency (lei). This had a

negative effect on the internal financial

stability and has reduced substantially the

purchasing power of Romanian citizens.

Foreign direct investments have increased

constantly, however, even if the growth

was less than in other Central European

countries.8

In 2000, the GDP growth rate has again

registered positive figures (1.6 per cent),

after a three-year period of economic

decline (19961999). The growth was

greater in the export-oriented industrial

sectors (the growth rate of industrialproduction was 8.2 per cent and that of

exports 22 per cent). At the same time

the strong currency reserves of the

National Bank have grown by $950m and

those of the others commercial banks by

$290m.9

INTERNET BANKING: ADVANTAGES

AND PROBLEMS

Using the Internet, people can access their

banking accounts and conduct transactions

24 hours a day, seven days a week, with

reduced costs and increased convenience.

On the other hand, due to the explosive

development of the digital environment,

the banks now have the opportunity to

expand their market penetration

internationally. A study completed by

Datamonitor estimates that at the end of

the year 2003, 10 per cent of the world

population (approximately 545 million

people) will have Internet access. Taking

advantage of this favourable situation,

many financial institutions have launched

corporate websites, offering personalised

online services. Customers can view

account balances and previous statements

from their PCs and download data into

personal financial management software

such as Quicken, Money, and Managing

Your Money. The e-banking services also

offer the possibility of opening newaccounts or direct deposits, ordering

cheques, changing addresses, or paying

bills online.10 All these operations are

secured through encryption, firewalls,

filtering routers and personal identification

numbers.11 Table 2 shows five examples of

UK banks offering e-banking services.

Online banking services are not only

implemented by large financial institutions;

starting as recently as in 1997, many small

banks have opened websites (eg State

National Bank of Big Springs, Texas).11

Internet banking offers multiple

advantages to banks, as well as individual

clients and corporate clients (See Table 3).

The role and content of banks websites

0

5

10

15

20

25

1998 2002

Europe

USA

millions

Figure 1 The evolution in the number of Internet banking users (Forrester Research, 2000)1


Gurau


4/17

Table 2 Examples of UK banks providing e-banking services12

Online bank Pros Cons Verdict Website address

Barclays OnlineBanking

Intuitive processesmake transactionseasier to perform

PC Bank 2.0 canbe confusing

Within thelimitations ofonline banking,

the package isamong the best

www. barclays.co.uk

Co-operativeInternetBanking

Internet-based;immediate access,no initial setup orsoftware charges

Limited facilities;fund transfer andbill paymentsrequire priorsetup

The Internetbanking service isa step in the rightdirection, butlimited functionalityoffers only minortime savings

www.cooperativebank.co.uk

Bank of Scotlandand OfficeBanking Service

Good housekeepingfunctions

Slow modemconnection;unintuitive userinterface; not a24-hour service

Despite areasonable rangeof functions, it ishard to keep trackof transactions onthe user interface

www.bankofscotland.co.uk

Royal Bank of

Scotland DirectBanking by PC

A well-designed

and secure service

Limited

functionality

Good service but it

has few functionscompared with theother onlineservices presentedhere

www.rbs.co.uk

First Direct PCBanking

Excellent interface;no software orservice charges

Becomesoperational only14 days afterregistering; noadditionalfeatures to FirstDirects phonebankingsystem

Intuitive and well-designed softwaremakes using aFirst Direct accountstraightforward

www.firstdirect.com

Table 3 The advantages of Internet banking1

Advantages

The bank Improved market image perceived as leaders in new technologiesimplementationReduced transaction costsBetter and quicker response to the market evolutionIncreased market penetration the online banking service can be accessed allover the worldThe use of the Internet site to advertise/sell new financial products

The individual client Reduced costs in accessing and using the banking servicesIncreased comfort and time-saving transactions can be made 24 hours a day,

without requiring physical interaction with the bankSpeed of transactionBetter administration of funds the history of transaction is registered on digitalsupport and can be analysed before a new transaction is initiated

The institutional client Reduced costs in accessing and using the banking servicesQuick and continuous access to information

Increased comfort and time-saving transactions can be made 24 hours a day,without requiring physical interaction with the bankSpeed of transactionBetter administration of funds the history of transaction is registered on digitalsupport and can be analysed before a new transaction is initiated




5/17

is evolving over time. Most banks start

with a simple web page comprising

general information about the bank and its

services, gradually introducing online

communication facilities with the

customers and then a full range of Internet

banking services (see Figure 2).

The cost of online applications increases

with the complexity of the site (see Figure

3). On the other hand the increased

complexity of online applications permits

better targeting and servicing of customers(implementing customer relationship

management functions), which in turn

increases the competitive advantage of the

bank.

A study conducted by Faulkner & Gray1

has shown that most of the existing bank

websites are informational. Around 20 per

cent of the bank sites offer the possibility

of limited transactions (self-service), and

only 1.58 per cent have implemented a

complex transactional site. Finally, only

0.56 per cent of the surveyed banks offer

highly customised online applications.

On the other hand, analysing thebarriers against the introduction and

development of online banking services,

Type of access

Internet banking services

Online transactions

Offline interactive site

Customised contact with the client;online communication through e-mail

Simple web presenceStatic pages with generalinformation about the bank

Time

Figure 2 The evolution of the banks web presence

1

2000-2005Transformation

1998-2003

Customisation

Transactions

CRM applications

Advanced

1997-2000

Online access to customisation

Interaction

personal accounts

Long-term sstrategy

Online transactions Distributed InternetInteractive Support for other network 1996-1999 communication financial services

Presence Web search engines

Possibilities for Self-service

General information personalised calculus

Cost: $5K - $500K Cost: $500K-$5M Cost: $5M-$50M+ Cost: $50M-$150M+

Figure 3 The relation between cost and web-site complexity in Internet Banking. (Source Gartner Group)


Gurau


6/17

two main categories can easily be

identified:

factors affecting the suppliers of

banking services

factors affecting the customers.

A study undertaken by KPMG Europe13

on a sample of 357 institutions, has

identified some problems experienced by

the banks (see Figure 4). Security seems to

be the most important problem. This is

understandable considering the number

of security breaks experienced in the last

two years by a number of major

European banks.14 The lack of knowledge

about the benefits of online banking is

increasing fast, as an effect of the

promotion campaign launched in the last

three years by many banks and financial

institutions.

For the clients, the four main reasons to

avoid online banking services are:13

security (25 per cent)

their bank is not offering online

services (20 per cent)

they prefer the personal contact with

the bank (18 per cent)

the benefits of online banking are not

obvious (16 per cent).

According to a survey by Deloitte

Consulting, less than one-third of

customers rate e-banking as an important

service, and of those only 22 per cent

actually use it. A more discouraging fact

for many banks is the fact that more than

30 per cent of customers do not even

know whether their bank provides online

services at all.15

Despite these problems financial

institutions and analysts are optimistic

about the future of online banking. The

solution to more popular online banking

services is the education of the customer,

the improvement of Internet security and

the formulation of a better customer-

oriented offer.15

THE ROMANIAN BANKING SYSTEM

At present, the Romanian banking system

consists of the National Bank of Romania

and 41 commercial banks.16 After anextremely difficult period experienced by

the Romanian banking system between

1998 and 1999 (seven commercial banks

have been removed from the Bank

Register during this period and several

others have experienced serious financial

problems), the situation substantially

improved in 2000 and 2001. This change

0

10

20

30

40

50

60

70

80

90

1998 1999

Security fears

Low skil ls level

Fears over on-linecustomers

Cost implications

Lack of knowledgeof benefits

%

Figure 4 Problems experienced by the suppliers of e-banking services. Source: KPMG European ResearchReport, November 1999

13




7/17

has been determined by the introduction at

the end of 1999 of a complex set of strict

regulations regarding the role of

supervision and control of the National

Bank of Romania upon the activities

developed by the commercial banks. The

risk to the Romanian financial system has

been reduced allowing a quick recovery

and development of the private

commercial banks.9

Nowadays, as a result of a series of

important privatisation initiatives, the

majority of Romanian commercial banks

are private (out of 41 banks, only three are

controlled by the state). Private capital

represents 60.5 per cent of the entire

capital invested in the Romanian bankingsector (of which 35.9 per cent represents

foreign private capital) and 57.9 per cent

of the Romanian banks assets.9

THE ROMANIAN INTERNET

INFRASTRUCTURE

In terms of Internet infrastructure

Romania, with Bulgaria and Croatia, is in

the forefront of Eastern Europe, with

levels approaching those of their Central

European neighbours (Czech Republic,

Hungary, Poland, Slovakia and Slovenia)

in several key factors. These are secure

servers (Romania 21); Internet services

(Romania 25 per cent); information

backbones (direct fibre optic links to major

European backbones; Romania operates

the only Internet exchange in the region,

based in Bucharest); and Internet hosts

(Romania 1,613 per million inhabitants).17

RESEARCH METHODOLOGY

The research presented in this paper was

conducted during July and August, 2001.

The rationale for this research was to:

identify the macroeconomic factors that

influence the success of e-banking

implementation in Romania

define the profile of the e-banking user

in Romania (institutional versus

individual users, age, level of

education, Internet knowledge and

skills).

A number of secondary information

sources were first accessed and consulted in

order to evaluate the general state of the

Romanian economy, the Romanian

banking system, the Internet infrastructure

in Romania, and the banks that have

already introduced an e-banking system.

Following this, the 41 banks operating in

Romania were contacted personally or by

telephone, in order to organise interviews

with bank representatives. As a result ofthis, 14 semi-structured interviews were

conducted with bank managers and other

bank personnel from 11 banks, either

directly or by telephone. The most

important issues highlighted during these

interviews were then discussed further

with a number of randomly selected bank

customers. The sampling procedure

applied was quota sampling (50 per cent

institutional clients and 50 per cent

individual clients). The bank clients were

randomly approached in different banks

buildings in the cities of Oradea and Cluj-

Napoca, and were asked if they would

agree to fill in a short questionnaire. As a

result of this approach, 300 bank clients

answered the questionnaire (150

institutional clients with business bank

accounts and 150 individual clients with

personal bank accounts).

The following hypotheses have been

formulated and verified through this

study:

H1: Success in the introduction and use of

e-banking technology depends on the

characteristics of

banks

Internet infrastructure

users.


Gurau


8/17

H2: The primary users of e-banking

systems in transition economies are

institutional clients.

H3: The adoption and use of e-banking

systems depends on the personal profile of

the users age, level of education and

knowledge about the Internet technology.

The main limitations of the research

methodology are the limited sample of

bank representatives that agreed to provide

primary information about e-banking

services (26.8 per cent of the banks

functioning in Romania at the time of the

survey), and the concentration of the

respondent bank clients in two majorRomanian cities. It can be considered,

however, that the samples were highly

representative since:

all the banks providing primary

information were offering e-banking

services; the information provided was

based on direct experience

the respondents from the two large

cities are representative of the urban

Romanian population; the rural

population seldom has access to

Internet connection and to e-banking

services.

DATA PRESENTATION AND ANALYSIS

E-banking services offered by the

Romanian commercial banks

The investigation of the web presence/

strategy of the 41 commercial banks

functioning in Romania in August 2001 is

presented in the Appendix. Considering

the definition of the different stages of e-

banking strategy, the situation of

Romanian banking strategies has been

analysed and evaluated.

The interviews with banks

representatives

The main objective of the interviews

conducted with banks representatives was

to identify the main factors responsible for

the successful implementation and

functioning of online banking services in

the Romanian economy. Table 4 shows

the aggregated results of this survey. The

bank representatives have identified

necessary requirements connected with the

population, Internet system, government

and the bank itself. These results confirm

the hypothesis that:

H1: The success in the introduction and use

of e-banking technology depends on the

characteristics of:

Table 4 The main requirements for the successful implementation and functioning of online banking servicesidentified by banks representatives

Elements Main factors

Population Internet knowledge and skills: the capacity to use the Internet effectivelyEthical behaviour: respecting and using fair rules of trade, avoiding opportunistic orharmful behaviour (eg software viruses, hacking, bank frauds)

Internet A developed Internet networkQuick and reliable Internet connections

Government Clear and comprehensive Internet legislation: legislative measures for dataprotection and data transfer, the punishment of online bank fraudsSupport of e-banking initiatives (Romanian National Bank, Ministry of Finance): fasttrack approvals for the implementation of e-banking systems; an effective controlsystem for preventing bank frauds and financial crises

Bank Customer-focused approach: adapting the website to the skills and needs of usersHigh quality/reliability of serviceClear e-business objectives/strategyAppropriate training of bank personnel




9/17

banks


users.

The successful introduction and

functioning of e-banking services proves to

be a complex operation which requires aharmonisation among all the interacting

elements of the economic and financial

system (see Figure 5).

THE QUESTIONNAIRE COMPLETED BY

BANK CLIENTS

The results displayed in Tables 5 and 6

confirm the hypothesis that:


systems in transition economies areinstitutional clients.

These findings are quite logical taking into

consideration that in the present

Romanian economy:

the institutions representatives (and

especially the business managers/

entrepreneurs) have easier access to an

Internet connection than the rest of the

population

the institutions representatives have a

larger volume of banking transactions

than the rest of the population, the

online banking services offeringadvantages in term of time, place and

funds administration

the institutions representatives (and

especially the business managers/

entrepreneurs) are more dynamic and

entrepreneurial than the rest of the

population, by the nature of their

profession.

The direct consequence of this

phenomenon is the introduction by many

Romanian commercial banks of an onlinebanking service formulated and directed

primarily at institutional clients.

There is a significant statistical

relationship between the level of education

of the respondents and their present use of

e-banking (at a level of p 5 0.0001), and

respectively with their intention to use

e-banking services in the future (at a level

Government

Website

E-banking

Website

E-banking

Bank

Bank

Digital environment

Individual customer

Institutional customer

Institutional customer

Individual customer

Physical environment

Figure 5 The interacting elements of the online banking environment


Gurau


10/17

of p 5 0.0001) (Tables 7 and 8). The

number of present users among the

respondents is quite low (4.7 per cent), but

from these 85.7 per cent have completed

university or postgraduate studies.

The data from Tables 9 and 10 show

that the propensity of respondents to use

e-banking services at present or in the

future is influenced by their knowledge of

the Internet. The results are statistically

significant, especially for the future use of

e-banking, demonstrate that, for the

present moment, there are also some other

factors that limit the capacity of

respondents to use online banking services

(such as the availability of a personal

Table 5 Crosstabulation between the present use of e-banking services and the type of respondents

Type of respondents/Present

use of e-banking

Present use of

e-banking

N %

No present use of

e-banking

N %

Total

N %

Institutional clients 12 85.7 138 48.3 150 50Individual clients 2 14.3 148 51.7 150 50Total 14 100 286 100 300 100

Chi square = 7.493 p = 0.006

Table 6 Crosstabulation between the future intention to use e-banking services and the type of respondents

Type of respondents/Future use of e-

banking

Future use of e-banking

N %

Do not know if they

will use e-banking in

the future

N %

Total

N %

Institutional clients 96 64.4 43 31.4 139 48.6Individual clients 53 35.6 94 68.6 147 51.4Total 149 100 137 100 286 100

Chi square = 31.195 p < 0.0001

Table 7 Crosstabulation between the present use of e-banking and the level of education of the respondents

Level of education of respondents/

Present use of e-banking

Present use of

e-banking

N %

No present use of

e-banking

N %

Total

N %

High school 2 14.3 216 75.5 218 72.7University 7 50 54 18.9 61 20.3Postgraduate studies 5 35.7 16 5.6 21 7.0Total 14 100 286 100 300 100

Chi square = 30.542 p < 0.0001

Table 8 Crosstabulation between the future use of e-banking and the level of education of the respondents

Level of education of respondents/

Future e-banking


N %

Do not know if they

will use e-banking

in the future

N %

Total

N %

High school 84 56.4 132 96.4 216 75.5University 50 33.6 4 2.9 54 18.9Postgraduate studies 15 10.1 1 0.7 16 5.6Total 149 100 137 100 286 100

Chi square = 61.707 p < 0.0001




11/17

Internet connection, financial resources,

etc).

The availability of a personal Internet

connection is one of the main reasons for

the respondents avoiding the use of e-

banking services even in the future (see

Table 11). Other important reasons are

lack of trust in Internet security, lack of

trust in the bank/banking system,

preference of a direct relationship with the

bank representative and lack of Internet

knowledge.

The results shown in Tables 7, 8, 9 and

10 partially confirm the hypothesis that:


systems depend on the personal profile of the

users: age, level of education, knowledge

about the Internet technology.

The statistical analysis has identified

significant statistical relationships between

the profession, level of education and level

of Internet knowledge of the respondents

and the present or future use of e-banking

services. No statistical relationship has been

found between the age of respondents and

the use of online banking services.

Table 12 shows the importance allocated

by institutional clients (Inst.) and

individual clients (Ind.) to a number of

factors for the successful introduction of e-

Table 9 Crosstabulation between the present use of e-banking and the level of Internet knowledge of therespondents

Level of Internet knowledge/

Present use of e-banking

Present use of

e-banking

N %

No present use of

e-banking

N %

Total

N %

No knowledge 0 0 50 17.5 50 16.7Some knowledge 3 21.4 129 45.1 132 44Medium level of knowledge 10 71.4 93 32.5 103 34.3High level of knowledge 1 7.1 14 4.9 15 5Total 14 100 286 100 300 100

Chi Square = 10.169 p = 0.017

Table 10 Crosstabulation between the future use of e-banking and the level of Internet knowledge of therespondents

Level of Internet knowledge/



N %

Do not know if they

will use e-banking

in the future

N %

Total

N %

No knowledge 10 6.7 40 29.2 50 17.5Some knowledge 61 40.9 69 50.4 130 45.5Medium level of knowledge 64 43 28 20.4 92 32.2High level of knowledge 14 9.4 0 0 14 4.9Total 149 100 137 100 286 100

Chi Square = 46.157 p < 0.0001

Table 11 Reasons given by respondents who do not want to adopt e-banking services

Reasons for not adopting e-banking services Frequency Percentage from 137

Lack of Internet knowledge and skills 46 33.6

Lack of personal Internet connection 114 83.2Lack of trust in Internet security 110 80.3Lack of trust in the bank/banking system 83 60.6Desire a direct relationship with the bank representative 78 56.9Others 11 8.1


Gurau


12/17

banking services. As can be seen, there are

a number of differences between the

perception of institutional clients and that

of individual clients: institutional clients

allocate more importance to the Internetinfrastructure, Internet security and the

promotion of bank services, while

individual clients consider more important

customers education and the reputation of

the bank. The bank guarantees have

maximum importance for both categories

of respondents.

In comparison with Table 12, the level

of importance allocated by institutional

clients (Inst.) and individual clients (Ind.)

to the factors for the successful use of e-

banking services is different, a long-termperspective. For both categories of

respondents (see Table 13) the bank

guarantees, the reliability of the bank

service and the security are extremely

important. The application of fair rules of

trade and the avoidance of opportunistic

business behaviour (business ethics) as well

as the capacity of the Internet connection

to provide fast and continuous data

transfer (reliability of Internet connection)

are considered to be more important by


CASE STUDY: BTRNET THE FIRST

INTERNET BANKING SERVICE

INTRODUCED IN ROMANIA18,19

This case study has been compiled using

information obtained from:

the website of the Turkish Romanian

Bank (BTR)19

a telephone interview with two BTR

bank representatives

Efinance.ro online journal.18

Launched on 26th July, 1999 by the

Turkish Romanian Bank, BTRnet was the

first Internet banking service using the

newest technology introduced in the

Romanian banking system. The

implementation of BTRnet required an

investment of $500,000 made over a one-

Table 12 The importance of the factors identified by institutional clients (Inst.) and individual clients (Ind.) forthe successful introduction of e-banking services

Factors for successful introduction of

e-banking / Level of importance

Low

importance

Inst. Ind.

Medium

importance

Inst. Ind.

High

importance

Inst. Ind.

Total

Inst. Ind.

Bank reputation 52 30 98 120 150 150Bank guarantees 150 150 150 150Internet infrastructure 9 92 141 58 150 150Internet security 14 150 136 150 150Users education 31 83 48 67 71 150 150Promotion of e-banking services 42 85 79 40 29 25 150 150

Table 13 The importance of the factors identified by institutional clients (Inst.) and individual clients (Ind.) forthe successful use of e-banking services

Factors for successful use of e-banking /

Level of importance

Low

importance

Inst. Ind.

Medium

importance

Inst. Ind.

High

importance

Inst. Ind.

Total

Inst. Ind.

Bank reputation 12 150 138 150 150Bank guarantees 150 150 150 150Reliability of Internet connection 10 39 140 111 150 150Reliability of bank service 150 150 150 150Security 150 150 150 150Business ethics 36 63 114 87 150 150




13/17

year period. The decision to offer this

service was based on research which

showed that the banks clients frequently

used computers (70 per cent of them had

Internet access) and desired (90 per cent of

them) to use an Internet banking service.

The number of Internet banking

transactions increased from 100 per month

in July 1999 to 17,000 in October 2000,

and the number of clients using this

service exceeded 7,000 (80 per cent of

which were institutional clients) of a total

portfolio of 100,000 clients. During the

period when BTRnet was available, over

113,000 transactions were performed,

requested mainly by institutional

clients.18,19

At present, any BTR client has real time

access to their account 24 hours a day,

seven days a week. They are able to: see

their account balance at any time; obtain

and print out statements of account; send

transaction instructions to the bank such as

to effect payments in Romanian lei to the

state budget or to other beneficiaries;

purchase and sell foreign currency;

perform foreign currency transfers; or

integrate other retail operations such as

credit/debit cards and salary payments. In

the case of lei or foreign currency

transfers, an additional facility allows such

transfers to be ordered up to seven

business days in advance.18,19

The service has two operation modes

online and offline offering the

possibility of reducing communication

costs, which are in fact the only costs of

this service. There are two types of access

levels, generically called Maker and

Authoriser (Maker allows visualisation,printing and editing of transactions, while

Authoriser allows a transaction

authorisation function in addition to the

previous functions).

In order to provide complete safety of

transactions, BTR used the services of the

German company Brokat Infosystems AG,

a top provider of safety applications in

electronic commerce. For its online banking

service, BTR uses the Twister software

platform, offered by Brokat and used by

over 1,600 companies worldwide (including

Deutsche Bank). The BTRnet service meets

all international standards regarding the

safety of Internet transactions, ensured by

the following elements:18,19

128 byte encryption technology, which

ensures the confidentiality and integrity

of messages between clients and the

bank

digital identity certificates issued by

authorised institutions like VeriSign

and RSA Data Security

firewalls that protect the banks internalnetwork from any unauthorised access

an automatic closing of the work

session after three minutes of idle time.

If an unauthorised access of an account has

been attempted, by using false passwords

and PIN codes, the access to that account

would be blocked after three attempts.

BTRnet offers its customers full

mobility, as there is no requirement for

the client to have special software on his

or her PC. The client could perform

banking transactions from any location: in

the country or abroad, at the office or at

home, in a train or car. In terms of costs,

this means that access to BTRnet requires

only the payment of the local

communication tariff between a PC and

the Internet provider.

BTRnet bank do not charge connection

fees or monthly subscriptions; clients only

pay the fees relating to their specific

transactions. As a first in electronicbanking transactions in Romania, BTRnet

is available to both legal entities and to

individuals.

CONCLUSIONS

This study has attempted to identify the

main elements that influence the successful


Gurau


14/17

introduction and functioning of e-banking

services in a transition economy

(Romania). In order to have a

comprehensive view of this topic, many

secondary sources of data have been

consulted, and primary surveys have been

conducted both with banks representatives

and with bank customers.

In order to understand the specific

conditions of the Romanian market for e-

banking services, a short presentation and

analysis have been made of the Romanian

economy, Romanian banking systems and

the Romanian Internet network. A

complete list of Romanian commercial

banks is provided in the Appendix, with

an indication of their stage ofimplementing online banking services.

Three research hypotheses have been

formulated:

H1: Success in the introduction and use of

e-banking technology depends on the

characteristics of:

banks


users.


systems in transition economies are



systems depends on the personal profile of

the users age, level of education and

knowledge about the Internet technology.

The results of the study have totally

confirmed the first two research

hypotheses (H1 and H2), and partiallyconfirmed the third one (H3).

An important objective of the study was

to identify the main factors considered by

the banks representatives and by the

customers to influence the successful

implementation and functioning of e-

banking services. The results have shown

that the process of online banking is

influenced by many inter-related factors

and institutions, including the quality and

security of Internet network, the level of

Internet knowledge and skills of the

population and government support, as

well as the Internet strategy of the bank

and the quality/reliability of online

banking services.

The presentation of a mini case study

The introduction of the first e-banking

service in Romania by the Turkish-

Romanian Bank offered the

opportunity to identify the main stages of

introducing a successful e-banking service

in Romania:

a thorough evaluation of the existingcustomers willingness and capability to

use the new service

the promotion of the new service

support offered to clients

low/no costs for clients

good e-banking security.

In comparison with the introduction of e-

banking services in an economically

developed country, the implementation of

this facility in a transition economy is

limited by a number of additional

problems:

the legislation (especially Internet and

financial regulations) may be unstable,

vague and incomplete

the financial system is characterised by

high levels of risk, the banks

reputation is weak, and the offer of

services is limited to the basic financial

instruments

the Internet connection may be slowand unreliable

the number of people with a personal

Internet connection is small

many people do not know how to use

the Internet facilities

opportunistic bank strategies.

Despite these problems, it can be considered




15/17

that the introduction of e-banking services in

Romania has been successful. The banks

have adapted their online offer to the specific

conditions of the economy (low or no fees,

customer support, online services mainly

targeted to institutional clients) and some of

them are starting to customise the services.

Because the Internet is still used by a

relatively small number of Romanians,

some banks (Demirbank Romania) have

already attempted to introduce mobile

banking (using WAP browsers). Since the

number of mobile phone users is much

larger than the number of Internet users in

Romania, this new technology has the

chance to become a popular service in the

near future.20,21 The future development of

this technology depends mainly, as this

study has shown, on the capacity of the

mobile phone companies to offer secure and

fast Internet connections, on the capability

of banks to provide secure and reliable e-

banking services and on the legislative

support of the Romanian government.

APPENDIX

The list of Romanian commercial banks and the stage of their e-banking

implementation16

Bank Date of coming

into operation

E-banking facilities The stage of e-banking

implementation

Frankfurt Bukarest Bank

AG, Frankfurt am

Main Bucharest

Branch

27.12.1979 No website No Internet presence

MISR Romanian Bank,

Cairo/Giza Bucharest

branch


Mindbank 10.07.1990 No website No Internet presence

Banque Franco-Roumaine,Paris Bucharest branch

16.07.1990 No Internet connection No Internet connection

The Romanian Bank for

Development

01.12.1990 Online access to bank

services mainly for

corporate clients

Interactive stage

The Romanian

Commercial Bank


services

Transactional stage

Banca Agricola 01.12.1990 No website No Internet presence

Ion Tiriac Commercial

Bank

20.03.1991 e-banking facilities,

mainly for corporate

clients

Interactive stage

Eurom Bank 10.04.1991 No website No Internet presence

Banc Post 26.11.1991 Online access to bank

services, for individualand corporate clients

Interactive stage

Eximbank 14.04.1992 Electronic banking

available, lack of

information on the

bank website

Interactive stage

The Romanian Bank 23.07.1992 Website, e-banking

service disabled

Presence stage

Finansbank Romania 10.12.1993 Online banking service

temporarily inactivated

Interactive stage


Gurau


16/17

Bank Date of coming

into operation


implementation

Transilvania Bank 28.01.1994 Online access to bank

services

Transactional stage

Romexterra 02.03.1994 E-banking facilities Interactive stageAlpha Bank Romania 02.03.1994 Online access to bank

services

Transactional stage

The Turkish-Romanian

Bank


services

Transactional stage

ING Bank N.V.,

Amsterdam Bucharest

Branch


services

Direct transfer of

financial electronic data

into the electronic

accounting systems of

customers (firms)

Interaction stage

Piraeus Bank Romania 03.05.1995 E-banking facilities Interaction stage

ABN Amro Bank 26.06.1995 Global corporate site,Romanian web page

disabled

Presence stage

Robank 20.12.1995 Online access to bank

services, mainly for

corporate clients

Transactional stage

National Bank of Greece

Bucharest Branch

06.03.1996 Website, no e-banking

service

Presence stage

Citibank Romania 26.06.1996 Online access to bank

services

Transactional stage

West Bank 26.06.1996 No website No Internet presence

Commercial Bank of Greece

(Romania)


services

Interaction stage

Astra 17.09.1996 Website, no e-bankingservice Presence stage

The Italian-Romanian Bank,

Roma - Bucharest Branch


Unirea Commercial Bank 25.11.1996 No website No Internet presence

Libra Bank 25.11.1996 Online access to bank

services

Transactional stage

Daewoo Bank (Romania) 22.01.1997 No website No Internet presence

Raiffeisenbank Romania 29.04.1997 Electronic banking;

payment system

integrated electronically

with the accounting

system of the firm

Transactional stage

Demirbank Romania 25.06.1997 Online access to bankservices; payment

system integrated with

the accounting system

of the firm; mobile

banking using WAP

technology

Transactional stage

Bank * Austria

Creditanstalt Romania


services

Transactional stage




17/17

REFERENCES

1 Tuchila, R. (2000) Banking Services on the Internet,

E-finance (Romania), www.efinance.ro, October.

2 Cateora, P.R. and Ghauri, P.N. (1999) International

Marketing. European edn, McGraw-Hill,

Maidenhead.

3 EBRD Transition Report (2000). Executive

Summary, www.ebrd.org/english/region/index.htm.

4 Miller R.R. (1998) Selling to Newly Emerging

Markets, Quorum Books, Westport.

5 Buckley, P.J. and Ghauri, P.N. (1994) Statement of

the issues, in Buckley, Peter J. and Ghauri, Pervez N.

(eds.) The Economics of Change in East and Central

Europe, Academic Press, London.

6 OECD Economic Surveys Romania (1998) OECD,

Paris.

7 National Bank of Romania (1999) Main

Macroeconomic Indicators, Annual Report,

www.bnro.ro.

8 EBRD Transition Report Update (1998) EBRD,

London, 1998.

9 Isarescu, M. (2001) The Romanian Economy in2001, E-Finance (Romania), www.efinance.ro, May.

10 Cochreo, S. (2001) Community Bank

Competitiveness Survey Web Census 2001, ABA

Banking Journal, April, pp. 3238.

11 Orr, B. (1997) Smaller Banks move into Internet

banking, www.banking.com/aba/strate_0897.htm.

12 Online Banking (1998) ZDNet UK,

www.zdnet.co.uk/pcmag/labs/1998/12/onlinebanking/.

13 Radoi, C. (2000) E-Risk, E-Finance (Romania),

www.efinance.ro, September.

14 Safety fears for web banking (2000) BBC News

Online, http://news.bbc.co.uk, August 1.

15 Consumers shy away from e-banking (2000) BBC

News Online, http://news.bbc.co.uk, October 2.

16 National Bank of Romania (2001) Bank Register,

www.bnro.ro, August 7.

17 United Nations (2000) Internet infrastructure

development in Transition Economies, Economic

Commission for Europe, www.unece.org.

18 BTRnet Service (2001) E-Finance (Romania),

www.efinance.ro, June.

19 BTRnet (1999) www.btr.ro.

20 Stefan, V. (2000) M-Banking and iTV-Banking

alternatives for Internet Banking? E-Finance

(Romania), www.efinance.ro, December.21 Demirbank Romania S.A. (2000) WAP mobile-

banking page, www.demirbank.ro.

Bank Date of coming

into operation


implementation

United Garanti Bank

International N.V.,

Amsterdam BucharestBranch

13.04.1998 Site under construction Site under construction

Romanian International

Bank


Egnatia Bank (Romania) 17.07.1998 Online service available

for Greek clients; no

specific website for

Romanian clients

Presence stage

Carpatica Commercial Bank 15.07.1999 Website, no e-banking

service

Presence stage

The Romanian Savings

Bank

17.09.1999 Website, no e-banking

service

Presence stage

The Bank of Investment and

Development


Volksbank Romania 10.04.2000 Site under construction Site under construction

Banca di Roma, Italia

Bucharest branch

07.11.2000 Global corporate site,

no Romanian web page

Presence stage

Gurau

e-banking in transition economies- the case of romania

Documents