eBanking: A Continuous Innovation for the Banking Industry ABSTRACT

eBanking is a concept which has transformed the way traditional banks do business. Its origin has been much longer than the more recent arrival of modern electronic gadgets like personal computers yet it is continually evolving to meet the ever changing and growing demands of a time-starved, continuously-mobile and convenience-seeking bank customers all over the world. This continuous innovation in eBanking is driven by the same factors which were attributed to its early adoption and eventually continuous growth including convenience, accessibility, security, privacy, design, content, speed, and features availability, among others. Significant advances have been achieved in most of these factors especially during the widespread proliferation of the internet. Customer satisfaction has also been increasing through the years. Nevertheless, there still lies an enormous opportunity for innovation in eBanking that could further bring about accrueing benefits to the innovation originators, the Banks, as well as their customers. Such opportunity is expected to further expand, perhaps in greater degree, the operating efficiencies and associated cost-savings together with far-reaching convenience and unbounded accessibility the innovation was primarily intended for. There is no gainsaying the fact that eBanking has made tremendous comforts and gains in life for both banking institutions and their valued customers.

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Introduction The impact of the tremendous development of information technology and the major advances in data management cannot be more apparent in business than the way it has transformed the manner banking institutions operate. No other sector of the economy has made such combination of management and technological innovation as impressive as the advent of electronic banking, more popularly called as e-Banking. While e-Banking has taken its form even before the advent of the internet initially through the introduction of automated teller machines (ATMs), its concept continues to evolve with the innovations brought about by advancement in digital technology that has created gadgets and electronic devices that has provided better portability, convenience, quality and accessibility to customers. With the unending complexity of continuously adapting to the changing needs and preferences of its customers, eBanking has become a forefront for a banks competitive advantage. As such, tremendous strides have been achieved in customers adoption of eBanking. However, the future demands nothing less than continuous innovation for banks to harness the benefits of eBanking towards increasing customer retention and satisfaction while striving for higher profitability. Definition and Evolution of eBanking Daniel defines electronic banking or e-Banking as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive channels (as cited in Geetha and Malarvizhi, 2012, p.1). Traditional banking products and services include performing the basic functions of account inquiry, deposit and withdrawal, check ordering, paying bills and also transferring funds. Recent banking products are investment and other financial products including credit cards management, mortgage applications and equity investments. Electronic devices such as automated teller machines (ATMs), personal

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computers (PCs), personal digital assistant (PDAs) and telephones have replaced the traditional face-to-face interaction with bank employees which used to be sole distribution method of providing bank services. eBanking, has therefore, become an electronic delivery channel of banking services ( Poon, 2008 as cited in Ismail and Osman, 2012 ). Indeed, the widespread adoption of the internet has made banking operations revolutionary and has contributed to the extensive use of eBanking. While the internet in its early stages was used as nothing but a means for the banks to publish service offerings and corporate data, its transformation to mirror bank transactions occurred simultaneously with developments in telecommunications, infrastructure, and software. Vaidya (2009) presents the phases in internet banking world in Figure 1 below.

FIGURE 1: PHASES IN INTERNET BANKING WORLD (Vaidya,2009, p.4) TMCOLOMA ALL RIGHTS RESERVED May 2013 page 3

Benefits and Rationale of eBanking eBanking started and continues to evolve as both the banks and its customers employ its benefits. Banks have primarily seen their operating costs reduced as more bank services have been rendered without the need to increase staffing, operating hours nor physical facilities. Operating efficiencies automatically increased as waiting times were reduced in existing service delivery locations or branches ( Sarel and Mamorstein, 2003 as cited in Geetha and Malarhvizhi, 2012 ). Bank customers, on the other hand, enjoy the convenience of performing a wide-range of banking transactions anytime and anywhere without the need to wait-in-line and be limited by the banks operating hours (Grabner-Kraeuter and Faullant, 2008; Hamlet, 2000 as cited in Geetha and Malarhvizhi, 2012 ). Such electronic and interactive channels which have allowed self-service technologies have, in fact, made customers "serve themselves more effectively (Zeithaml and Bitner, 2003 as cited in Ismail and Osman, 2012, p.2). Factors Affecting Usage of eBanking As early as 2002 when internet banking was at its infancy, Nsouli and Schaechter (2002) already posed the challenges brought about by the changing financial landscape which was expected to increase cross-border transactions as a result of the drastically lower transaction costs of availing bank services and its associated greater ease. Although challenges for financial regulators were more apparent like regulatory, legal, reputational and operational risks the necessity of security brought about by the reliance on technology to provide banking services have likewise been given emphasis. A number of studies been conducted both to monitor the trends in eBanking usage and to identify the factors which encouraged its adoption. Poon (2008 as cited in Ismail and Osman, 2012, p.2) identified a number of factors, namely, convenience of usage, accessibility, features

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availability, content, speed, bank management and image, security, privacy, design, and fees and charges as significant in users adoption of e-banking services. Privacy and security were major sources of dissatisfaction that influenced greatly the adoption of users. Accessibility, convenience, design and content, on the other hand, were sources of satisfaction. Success of ebanking were attributed to speed, product features availability, and reasonable service fees and charges, and the banks operations management as well. A number of these adoption factors were further defined in other related studies. Accessibility, being one of the most studied component of eBanking adoption has been characterized as the ability of users to access information and services from the internet ( Hackett and Parmanto, 2009 as cited in Ahmad and Al-Zubi, 2011). It is determined by a number of factors including content format, user's hardware, software and settings, internet connections, environmental conditions and user's abilities and disabilities. Privacy concerns is related to the customer's trust on the bank's privacy policies (Gerrard and Cunningham, 2003 as cited in Ahmad and Al-Zubi, 2011). Encryption technology refers to the common feature at all bank sites that allows it to secure information privacy. These commonly take the form of different unique identifiers and passwords including an automatic logging-off during a period of inactivity. Kimery and McCord (2002 as cited in Ahmad and Al-Zubi, 2011) relate security to the extent "to which the web site guarantees the safety of customers` financial and personal information." Country-specific researches continue to be conducted to expound on cultural factors which affect utilization of eBanking. Geetha & Malarvizhi (2012) conducted an empirical investigation on the acceptance of e-banking in India which also supported security, privacy and awareness levels as critical factors in the acceptance of e-banking services among Indian

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customers. Yee and Faziharudean (2010) found out that trust, habit and most importantly, reputation were of significant influence on customer loyalty towards eBanking in Malaysia. Interestingly, service quality and perceived value were not significantly related to customer loyalty for Malaysians. Accessibility, convenience, security, privacy, content, design, speed, fees and charges were the factors with influence on customer satisfaction in Jordan ( Ahmad and AlZubi, 2011). Ismail and Osman (2012) found out that high-income clients and those with current account and had computers as well as internet literate were more likely to use eBanking services in Sudan where Automated Teller Machines (ATMs) were still the most popular channel of eBanking. Best practices in eBanking adoption in Kenya (Magutu, et al., 2011) included improved customer service, reduced number of customers in the banking hall, reduced operating costs and increased market share. The challenges identified in the adoption of e-banking in the said study included cost of implementation, compatibility with existing legacy systems, and security concerns pronouncing the emphasis on desired levels of security and privacy. Unreliable telecommunication and the lack of legislation governing e-commerce transactions were also raised as critical concerns. The growing interest and attention to eBanking adoption not just in its process-related concern but market adoption in different countries has signaled the growth and expansion of adoption of eBanking all over the world. It is worthwhile to discern as well the stage of eBanking in the top economy of the world, the United States. Current State of eBanking in the United States comScore's survey (2012) on the state of online and mobile banking till 2011 points to the internet continuing to be an integral part of everyday banking for Americans. Figure 2 presents internet banking usage for the customers of the top five (5) banks in the United States

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including Bank of America, Capital One, Chase, Citibank, HSBC, ING Direct, PNC, SunTrust, U.S. Bank, Wachovia, and Wells Fargo. Usage was measured from customers who had liquid deposit accounts (LDA) which included checking, savings, and money, market accounts, but excluding certificates of deposits (CDs).

FIGURE 2: GROWTH OF ONLINE CUSTOMERS IN THE UNITED STATES DURING the PERIODS 3rd QUARTER 2004 to 1st QUARTER 2011 ( Lenart and Frederiksen,2012, p.4) Moreover, the same comScore 2011 Banking survey resulted to growing satisfaction with financial institutions and banking websites as illustrated in the charts Figures 3 to 5 below

FIGURE 3: PERCENTAGE (% ) OF CUSTOMER SATISFACTION with FINANCIAL INSTITUTIONS ( BANKS, CREDIT CARDS, BROKERAGE) PERIOD COVERED : 2009 - 2011 ( Lenart and Frederiksen,2012, p.5) TMCOLOMA ALL RIGHTS RESERVED May 2013 page 7

FIGURE 4: PERCENTAGE (% ) OF CUSTOMER SATISFACTION with the TOP FIVE (5) US BIGGEST BANKS PERIOD COVERED : 2009 - 2011 ( Lenart and Frederiksen,2012, p.6)

FIGURE 5: PERCENTAGE (% ) OF CUSTOMER SATISFACTION WITH E-BANKING FACILITIES OF TOP US BANKS PERIOD COVERED : 2009 - 2011 ( Lenart and Frederiksen,2012, p.6)

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The statistics presented in the comScores survey presented above attest to the continuous growing adoption and incorporation of eBanking in the lives of regular Americans. With the United States being the largest economy in the world, it is thus imperative not just for American banks to continue to innovate on their eBanking offerings but to leverage it for their competitive advantage as well.

Future Areas of Growth for eBanking After such a feat of widespread international adoption in the last decade or so, what is actually next for eBanking? Vaidya (2009) enumerates goals suggested to banks-of-today to maximize utilization of the internet as a banking chanel. These include improving market share, enabling independent revenue generation, complementing revenue generation with other channels, ensuring customer retention, improving customer experience, providing new avenues and never-availed of product and service offerings, building, nurturing and enhancing a brand, ensuring cost reduction, providing cross-sale and complementing multi-channel deployment. Furthermore, Vaidya (2009) incorporated such goals into a model called an internet banking real estate which illustrates the transformational journey of eBanking as it integrates resources in technology, management and infrastructure to achieve the above-mentioned goals. The concept of this e-banking real estate is illustrated in Figure 6 in the next page.

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FIGURE 6: e-BANKING REAL ESTATE ( Vaidya, 2009, p.7 ) On the other hand, e-Banking in the business and corporate banking component seems to still have a lot of room for further improvement. Bray and Watson (2011) claim that when IBM completed a benchmark of UK business and corporate banking Internet portals in 2011 and showed that business and corporate banking Internet portals lag well behind retail internet banking market. General observations from the study included limited site functionality for corporate banking internet, absence of mobile service, business banking internet being hosted on retail platforms, minimal use of alerts, notifications and secure messaging, among others. Upgrading business banking would provide three (3) major benefits to banks, namely, customer retention, additional revenues from increasing value-added functionality, and cost reduction as business customers become less dependent on the high cost channels to transact. In addition, Bray and Watson (2011) believe that future business banking usage will be based around functionality and pricing.

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Conclusion

eBanking, conclusively, has made significant impact on both transactions contributing to the revenue and profitability of the bank and the indispensable financial transactions required by its customers. Its overall success has equally been reflected on the growth of economies all over the world. The major benefits appurtenant to eBanking have indubitably changed the business environment by leaps and bounds. As information technology and advances in data management continue to develop, eBanking necessarily will go through unprecedented innovations as well. The management skills to match such disruptive changes will likewise be necessary to fully make eBanking a continuous competitive advantage.

References: Ahmad, A.E.M.K. & Al-Zubi, H.A. (2011). E-banking Functionality and Outcomes of Customer Satisfaction: An Empirical Investigation. International Journal of Marketing Studies, 3 (1), 50-65. Bray, A. & Watson, J. (2011). The future of Internet banking for business.IBM Global Business Services. Retrieved from http://www-935.ibm.com/services/uk/gbs/pdf/ Geetha, K.T. & Malarhvizhi, V. (2012). Acceptance of E-Banking Among Customers (An Empirical Investigation in India). Journal of Management and Science, 2 (1),.1-9. Ismail, M. A. and Osman, M. A.Y. (2012). Factors Influencing the Adoption of E-banking in Sudan: Perceptions of Retail Banking Clients. Journal of Internet Banking and Commerce, 17 (3). Retrieved from http://www.arraydev.com/commerce/jibc/201212/mohamedismailv02.pdf

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Lenart, S. and Frederiksen, N. 2011 State of Online and Mobile Banking. comScore Financial Services.February 2012. Magutu, P.O., et al. E-Commerce Products and Services in the Banking Industry: The Adoption and Usage in Commercial Banks in Kenya. Journal of Electronic Banking Systems. Vol 2011. Retrieved from
http://www.ibimapublishing.com/journals/JEBS/2011/678961/a678961.html

Nsouli, S.M. & Schaechter, A. ( 2002 ) Challenges of the "E-Banking Revolution." Finance & Development, 39 (3). Retrieved from
http://www.imf.org/external/pubs/ft/fandd/2002/09/nsouli.htm

Vaidya, S. (2009). Internet Banking Channel, A Case for Comprehensive Usage. TATA Consultancy Services. Retrieved from

http://www.tcs.com/SiteCollectionDocuments/

Yee, B. Y. and Faziharudean, T.M. (2010). Factors Affecting Customer Loyalty of Using Internet Banking in Malaysia. Journal of Electronic Banking Systems, Vol 2010. Retrieved
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