Research Proposal on "E-Banking Its History and Current Customer Behavior"

Research Proposal 50 pages (12488 words) Sources: 30 Style: Harvard

[EXCERPT] . . . .

E-Banking its History and Current Customer Behavior

This work demonstrates the growth trend of ebanking first by developing a brief history of the trend and then by focusing on the development of customer use and adoption of the various forms of ebanking. The work will then focus on a case study methodology that will enlighten the reader as to the needs of customer care and usage patterns and provide some recommendations to banks about growing market share, gaining new customers, retaining customers and innovating for the future of ebanking.

E-banking in general is a trend that has grown and evolved consistently over the last 30 years. E-banking can be defined as any banking transaction that takes place via electronic means, including automated teller transactions, the oldest form of e-banking, to wireless transactions via a cell phone, but most commonly e-banking is associated with account management tasks and transactions that involve the internet. Internet banking has a history that runs concurrent with the world wide web in general as a result of the fact that very early in its inception creators and users began to see the internet as a way to develop commerce and to reach a greater number of people with it. E-banking then became a natural progression of the growth of internet shopping, and made it possible for bank customers to safely and securely conduct their banking business online. From about 1983, just a few short years after the launch of the world wide web some of the first internet transaction models were launched and since then the growth of the service options as well as the possibilities for transactions has grown exponentially.

Internet banking has now become a mainstay of the banking industry and there are even a few banks which are internet only based. Customers of these banks receive digital automatic deposits from various resources, most commonly employers and then all transactions, excluding a few possible cash transactions are then supported in an entirely electronic format.

Security First Network Bank (SFNB), the world's first Internet-only bank. When it opened its virtual doors in the fall of 1995, SFNB was using internally developed technology that was based on two then-radical premises: 1.the software required for remote banking works better for everyone if it lives on the bank's network server, not inside every customer's PC; and 2. The Internet can be made secure for financial transactions. SFNB did indeed prove that the concept worked. For three pioneering years it successfully, but not profitably, ran its e-bank and convinced some 15,000 depositors that the Internet was both convenient and secure. That pathbreaking approach caught on with a good share of the country's biggest banks (Orr 1999:32)

Looking at a European alternative is the success story of egg.com

"THE internet is here to stay," says Andrew Firth, marketing director of Egg, the country's first and best-known internet bank [UK]. "People are signing on as never before, buying PCs…."Up to 80,000 people visit Egg every day. The reason is straightforward, says Andrew."We were the first company to popularise the net as a place to bank. Nearly 90 per cent of people recognise our name. They know we have great deals, better than any high-street banks. Banking is a service which lends itself to an interactive medium. "There are no products to be delivered. It's a case of being able to access your information whenever you want. "Two seconds at work will tell you what's going on in your account. Once people have overcome the initial fear they never go back. ("- -- : Safety Net for" 2001:44)

Yet, for most banking customers the electronic options of their retail bank are supplemental to live transactions. Customers can choose to pay bills online, transfer funds from different accounts and a variety of other things in supplement to making live deposits of funds and managing their account information and content via a live teller. The current system also has begun to expand again in a new direction where wireless banking is now supported by wireless technology and many transactions previously only possible live or via the web are now available via wireless devices or even interactive television. This trend is much more common in Europe as the wireless devices and systems utilized there are more commonly capable of digital information transfer. For the purpose of this dissertation customer behavior in the later example, i.e. with the customer banking with a retail bank that has e-banking functions, will be used as this currently constitutes the largest percentage of e-bank users, using all forms of e-banking venues. The fact that this is the largest group of e-bank users can be supported by the fact that though the overall banking industry has had a reduction in number of organisation banks branch demand is still on the rise. In other words customers still wish to use branches but many choose to supplement bank use with the convenience of e-banking in its many forms. (Gup 2003:2) This trend then requires that most if not all retail banks innovate and adopt technologies that support this supplemental ebanking standard in a format that is still customer friendly and supportive of all the necessary security standards that support customer confidence and ensure secure transactions.

For the purpose of demonstration the following graph demonstrates the growth of ebanking in the U.S., as it is in correlation to the growth of the internet in general. In other words as customers became more savvy of the use of the internet for a variety of other commerce practices they also began to see and use it as a supplemental banking system, where the bank is just another retailer utilizing internet technology to improve access and provide convenience for customers, just as any other retailer would for any other customer.

A particularly strong trend in ebanking is the utilization of the internet to pay bills online. Much of this has previously been supported by the banking industry and most banks now offer direct payment options that are coordinated not by the retailer but by the bank and therefore do not require the customer to utilize their debit smart cards or credit cards for every billpay transaction. Banks are attempting to secure a greater market share of these transactions and reduce the number of billpay sites that have developed around this trend. Again this is a U.S. demonstration but would likely mirror the changes and standards in other parts of the world where the internet proliferates the marketplace.

The writer of the work that graphed these trends from a larger survey conducted by CheckFree notes that within the survey that was completed to demonstrate the utilization of electronic billpay customers noted three main reasons why they use the internet to bank: "Respondents identified 24/7 access to account balances, time savings and better organization of their finances as the most important benefits of conducting banking activities online." (Frank August 28, 2008: http://pindebit.blogspot.com/2008/08/75-of-online-americans-use-ebilling.html)

For a more precise look at the internet banking trend in Europe one must look at European-based research, such as that conducted by Thomas Meyer at Deutsche Bank Research. (Meyer 2006)The discoveries of this work mirror those of customer bases in the U.S. And elsewhere, excluding two particular issues. Europe has a smaller percentage overall of online bankers and wireless transactions are more available in Europe due to the technology of wireless devices and networks' digital formats. It remains to be seen if such availability will be highly utilized, but if the trend associated with wireless dependence continue it is likely that banking in Europe will also see this as a growing avenue of service in ebanking.

Meyer has developed a comprehensive snapshot of internet banking in Europe. The above map (see figure 3) explores the regional differences of the adoption trend by customers and can easily be used to frame the thesis that usage rates for ebanking run concurrent to internet usage in general. Additionally, Meyer notes a strong regional north to south decline in adoption of ebanking in Europe as well as a remarkable difference in percentage of adoption, 36% average usage compared to 44% in the U.S. Meyer also notes that the GDP of a nation in the EU correlates to ebanking, as the lower the GDP the lower the rate of adoption of online banking and ebanking in general. Education also seems to drive ebanking trends in Europe as the higher the level of education and individual has the greater the likelihood of adopting ebanking.

Security fears are also adoption barriers though they do not seem to correlate to any real security breech events.

Age is not a factor and generally those who are shopping online are also more willing to adopt online banking and other forms of ebanking. (Meyer 2006)

"The main worry for online banking customers, of course, is security. Andrew explained there are three levels of security at Egg. First is a 128-bit SSL encryption engine, as used by the United States military. Second are 'Firewalls' (software which… READ MORE

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