Barriers of Electronic banking development Study case: Saman bank

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1 VOL, NO 5 of Electronic banking development Study case: Saman bank Alireza Rabi Professor, Farabi Institute of Higher Education Graduate School of Management Zahra Boostani, MIT student Iran- Karaj- Mehrshahr Abstract World development due to technology growth, information technology (IT), internet, electronic government, and electronic business which has derived from IT, all have made a huge interchange in communications and data transmission process. But of course this interesting technology growth through the world is very different from the fact in Iran. There are several reasons to these differences. Some are due to delay in preparation of basic structures. Basic structure recognition and determination the present challenges in creation and development of electronic banking, all will be an appropriate guide for banks to success. Considering available traditional methods in Iran s banking system and deficiency of those models to giving new services,felt the essence of such research focusing on the challenges ( problems )of electronic banking development in Saman Bank,s staff ( the managers and bankers )and customers. We have used questionnaire to data gathering. Based on the available literature, the main recognized problems or barriers are social - Cultural barriers, Management barriers and Technological barriers. After doing the research process, from the barrier point of view, we understood that management factors Has placed one, second is social- cultural factors, third technological factors, and the last is economical factors. Key Words: Electronic Banking (E.B), Cultural barriers, management barriers, economical barriers, technical.. Interaction Information technology development and communication network, have opened a new horizon in front of markets and financial section. New processing methods date interchange and making data base, all, have caused efficiency improvement, speeding connection & decreasing costs in the financial in statutes. These are main factors in the field of financial competitive markets and changed the attitude toward them (manuchehri, 84). On the other hand, fast development of information technology networks and then banking services, figural and semi figural financial institutions, private banks, and so have made a high competitive condition. Nature and method of new electronic banking, through the change in their life, has changed the customer s expectations (hamid zade & etal, 86). Customers expect new and effective techniques and services, so, a bank is successful that be able to attract more sources. Electronic banking is the only choice to achieve the goal of development (Aamade & etal 88). Electronic banking is the acme of informatics technology usage, to omit time and place limitations. During the past decades, money flow factors were: Bank working hours, number and place of branches, but, now electronic banking. Let s define Electronic banking, basically, Electronic banking, refers to such facilities for customers to access banking services safely, without physically presentation (P. kasturivatna, 004) COPY RIGHT 0 Institute of Interdisciplinary Business Research

2 VOL, NO 5 Aim of this paper is the recognition of electronic banking developing problems from the view of saman banks managers, experts and customers.. Electronic banking In the field of economy, electronic banking is one of the most important generations of technology revolution. Electronic banking changed previous business methods, basically. Electronic banking has different levels, and each one has its definition. however, tow common features are: use of computer data for computer if you move to a complete Electronic banking, you will have less manual operations, more centralized software s, more developed accessible networks, less time and place limitations, a more safe environment for B.C (goudarzi & etal, 87) Electronic banking was used for the first time in the us in 995, then in developed countries and later in other countries (Wendy win & etal, 005). In Electronic banking system, customer can use services in levels: In formatory, connection and transaction. A) In formatory: this is the first or lowest level of internet banking. Bank introduces service and banking data, through the networks (public or private). B) Connections: this is level connect banking system and customers, and has high risking, to safely keep data, banks need suitable control C) Transaction.This is the highest risking level, so really need appropriate security system. In this level customer can perform all his own banking operations; e.g.: pay bill, draw a cheque, money interchange and accounting (mohammadi & etal 89). There is not an exact definition for electronic banking. So the common point of all definitions can be: the use of electronic equipments in banking services. Although in following we bring some definitions: - Availability of banking service to customers by secure media and without physical presentations (nouri, 87). - Service providing to customers directly via electronic communication channel (seyed javadin & etal, 006). - Use of electronic methods to provide Electronic banking services in different channels (ways) of payment (shirani, 84). - Electronic banking, supplies banking services whit low value (volume) via ATM, credit card, telephone, TV, and so on... (Pennathar, Anita K, 00). Now a complete definition: Use of channels of Electronic banking delivering, that is an under line for electronically finance and the most important channels are: internet, wireless connection systems, ATM telephone Electronic banking, and so on. (Ali khanzade, 87).. History of electronic banking Technologies of bank such as: account processing, record, save, getting and transferring information of customers. Gradually have completed and recently passed a remarkable changes in the system.we divided changes into 4 periods. In every period human is re placing with computer and software. Table show these periods, in banking system (fat hian & etal, 86). COPY RIGHT 0 Institute of Interdisciplinary Business Research

3 Table: Periods of change in banking VOL, NO 5 period First period: counter (back ) automation Time 960 s feature Central computers, all data and bills from bank branches were sent to a center office in the form of classified papers. They were processing at night. In this period, automation didn t help competitonary or convenience effect. Second period: counter (front ) Automation 970 s Bank recorded electronically operations in the presence of customer. Data transferring among grand computer networks had done effectively. In this period, banker did all operations they used less papers than previous software was no unified. Third period: connecting customers to their accounts 980 s customer connects to his account data via telephone, ATM, credit card or personal computer; pay, reeve transfer money electronically. Period fourth: system unification & connect customer to all banking operation 990s to now All bank operation is doing (Performing) Electronically. Both, bank and customer always can receive exact necessary in formatting especial expand equipments help that. in this period, we can see a real connection among bank and customer for convenience bank needs one of the following items:. Try to standardize, present system (soft and hardware ). Try to make unified system, apart from last system. Save money and human force are other features of this period. 4. Comparison of electronic Banking and traditional For comparison and contrast between these two models of banking a remarkable point is that E.B is active and futuristic but traditional banking, conservatively tries to decrease costs in different ways while E.B, provides service and tries to improve his work, customer satisfaction and increase the income giving services and getting wages. There fore, main goal in Electronic banking is bank income growth by giving different services. In table, we have compared the features of Electronic banking and traditional bank (goudarzi & etal, 87). COPY RIGHT 0 Institute of Interdisciplinary Business Research

4 Table : Comparison of Electronic banking and traditional bank features VOL, NO 5 Traditional banking Electronic banking Un limited markets bank competitions giving limited services Give services in special form and dependant to branches, Centralization of cost income gaining by margin (benefit) Unlimited market place giving different services according to customers need income s growth by wage 4 hour services positive relationships with banks limit human force and bourrcrasia work in limited hours dependent to formal documentary system (Source: Ali khanzadeh, 87) 5. Electronic banking advantages The main advantage of Electronic banking is new a distribution channels, giving improved services to customers and use of electronic commerce strategies. Electronic banking has the view of long term, middle term and short term which is a benefit. For example, short term planning consist, integrated competition & customer attraction (shorter than one year). In middle term view (8 month): channel integration (consolidation), data management, different customers, customer guide and cost decrease. For long term view: decreasing the costs of transaction processing, services to customers, income generation (Manuchehri, 84). 6. Challenges of Electronic banking systems Here we note some challenges of Electronic banking systems (H. C. Lau & etal, 00): 6.. Challenges before system. Lack of outline plans & sufficient study to perform new technology.. Lack of choose that how perform technology with the highest efficiency.. Lack of culture and knowledge of banks about Electronic banking. 4. Lack of engagement of banks management in the system. 5. Lack of management to use experts in IT section. 6. Traditional attitude toward data reengineering. 7. Lack of economical justification and risk to use Electronic banking systems. 6.. Challenges with performing system. Weakness of available facilities. Lack of money protection. Lack of special enterprises or their support, ca, gateway institutes such as ps ps & VISA COPY RIGHT 0 Institute of Interdisciplinary Business Research 4

5 4. Lack of content & customers interest VOL, NO Challenges after system. Lack of legal rights and electronic justification. People don t like to reveal their financial policies. Lack of motivation and culture training 4. Lack of trust in users 5. Lack of electronically security e.g.: E-sing & PKI 7. Consenpetual model of research Investigation shows that soft factors & hard factors are two effective factors on electronic banking development (H.e.lau & etal, 00). Soft factors: are difficult to qualify and depends on long term view (W.e. Lewis & etal 006). Also culture, know ledge, human relationships, trust, flexibility, training, security & decision making are soft factors. In this paper we named them: Social cultural problems and management problems hard factors are most systematic and play protective role for soft factors (W.G.lewis & etal 006). Hard factors involve: technical economical infrastructures, cost supply for network development (Ian smith & etal 005). Investments, software & hardware providing (klus & etal 007). After review the literature of Electronic banking, now produce the conceptual model of research and then the problems which classified into 4 categories. Picture : Conceptual model of research; Problem of Electronic banking development Social cultural Problems Financial problems Management Problems Electronic banking development Technological problems Soft factors Hard factors 8. Research Hypothesis We reviewed concepts and literature in previous part, now we consider four Hypotheses for them. In table you see index of each Hypothesis. 8.. Social cultural problems is on Electronic banking barrier to perform and develop Electronic banking in saman bank. COPY RIGHT 0 Institute of Interdisciplinary Business Research 5

6 VOL, NO Management problem is on Electronic banking barrier to perform and develop Electronic banking in saman bank. 8.. Financial problem is on Electronic banking barrier to perform and develop Electronic banking in saman bank Technical problem is on Electronic banking barrier to perform and develop Electronic banking in saman bank. Table : Problems of Electronic banking development identified in saman bank Index Barrier connection networks with low speed lack of software and hardware Technological lack of internet from ISP private Electronic banking lack of legal support non trust by customer about Electronic banking Cultural-social lack of knowledge about E.B among customers lack of expert in the field of ELS multi-centers of decision making Managerial barriers management interchange site management sites high cost of investment in the field communication high cost of development in the field of electronic terminal Financial high cost of updating networks 9. Research method Method of research in this paper is discretional measurement statistical involves parts: first: managers of saman bank, Second: 9 It experts, Third: sample of 96 customers. We gathered data and used librarian method ( such as books & thesis) and also field method (questioner distribution)variables are strategies and problems of Electronic banking, which are classified in the form of financial problems, social cultural problems, management problem and technical problem. In this research, to evaluate the Hypothesis, we used T-student test, in statistic we used mean center index, mode, and median. 0. reliability, validity and questioner measurement scale Questioner is the main mean to determine reliability. First we gave them to managers of saman bank and experts, then gathered, we changed those editable questions & omitted in related question. We used cru Bach alpha coefficient to determine validity. cronbach alpha is %95 in this research and measurement scale is licort 5 score spectrum. After analyzing demographic data, we explain Hypothesis. We had some proposals to conclude the result. COPY RIGHT 0 Institute of Interdisciplinary Business Research 6

7 . Data analysis VOL, NO 5 First we analyze demographic data of managers, experts and customer. Tables 7 show these data. Table 4 shows three groups of statistical, according to traditional groups. Table 5, shows their literacy level. Table 4 shows that 8.68% of managers are older than 40 years, but 66.6% informatics experts below 5. Customer all are young people, because 6.47% of them are below 5 years. In according to table 5, 6.6% of managers have BA degree, 55.5% have Ma degree or more 5.5% of customers have associate degree (higher ) or less. Table 6; show statistical groups in according to job background of managers or experts, record of using bank services for customer. This table tells that only 9.09% of managers in saman bank, have record of services less than 5 years,. % of experts below 5 years & 44.4 % to 0 interestingly 6.45% customers, 5years or less, are using services. In table 7 we have managers, experts and customers gender (sex) distribution. Accordingly, 8. managers are female, and of them are men. 66.6% of experts and customer women, 57% of customer are men. Table 4: Age distribution research static units Age Mangers Experts Customer Group Number Percent Number Percent Number Percent 0& less Total COPY RIGHT 0 Institute of Interdisciplinary Business Research 7

8 Table 5: Distribution of statistical units according to education background VOL, NO 5 Literacy level Under Diploma and higher Mangers Experts Customer Number Percent Number Percent Number Percent BA MAX more Total Table 6: distribution of managers & experts according to their record of service & customers based on use of saman bank service Record year Mangers Experts Customer Number Percent Number Percent Number Percent Under 5 year year Upper 0 year than Total Table 7: distribution of statistical based on sex (gender) Gender Mangers Experts Customer Number Percent Number Percent Number Percent Women Men Total COPY RIGHT 0 Institute of Interdisciplinary Business Research 8

9 . Test hypothesis VOL, NO 5.. Hypothesis : social cultural problems H0: A social cultural problem is a barrier of Electronic banking development in saman bank. HI: A social cultural problem is not a barrier of Electronic banking development in saman bank. Result of Hypothesis testing, t = and significance level, sig = 0.05 so, we conclude that relation of confidence level; 0.95% is meaningful and Oh hypothesis is accepted. Table 8: Effect of social- cultural problem on E.B development based on variables Frequency percent Standard deviation t Significance level Literacy Under Diploma and higher BA MAX more Record Under 5 year year Upper than 0 year Gender Men Women In table 8, raw, shows the mean in fluency of social cultural problem on E.B development based on education background t=7.895 significance level 0., show that there is not significance difference between people with different education background. Second raw, shows significance difference between statistical and education problem. In other words, these respondents with under 5 year job experience mostly believe social- cultural problems in E.B development. Third raw shows significance difference among men and women. Men specially think that social cultural problems is affective in E.B development... Second Hypothesis: management problems H0: In saman bank, management problem is a barrier to develop E.B H: In saman bank, management is nit a barrier to develop E.B The result of test: t=., significance level, sig = 0.05 and confidence level 0.95, show positive relation between man problems and E.B so, hypothesis oh is accepted. COPY RIGHT 0 Institute of Interdisciplinary Business Research 9

10 VOL, NO 5 Table 9: Effect of management problems on E.B based on variables Frequency percent Standard deviation t Significance level Literacy Under Diploma and higher Record BA MAX more Under 5 year year Gender Upper than year Men Women First raw of this table show the effect of management problems on E.B development based on education background. T and sig =0.8 show that there is not significance difference. Respondents with different educational background believe that these Electronic banking barriers are important on E.B development. Also second raw shows that there is not a significance difference among respondent s whit different records. Raw show that there is not significance difference among men & women they believe that, these Electronic banking barriers are influence on E.B development... Third hypothesis: financial problems H0: financial problem is a barrier in E.B development in saman bank. H: financial problem is not a barrier in E.B development in saman bank. T= -.5 and significance level sign = 0.67 show that there is not a positive Electronic banking between financial barrier and E.B. So hypothesis H is accepted. COPY RIGHT 0 Institute of Interdisciplinary Business Research 0

11 Table 0: Effect of Technological problems on E.B based on variables VOL, NO 5 Frequency percent Standard deviation t Significance level Literacy Under Diploma and higher BA MAX more Record Under 5 year year Upper than 0 year Gender Men Women Raw in this table show the mean of effect of financial problems on E.B development based on educational background of respondents they don t believe that barrier are effective. Raw Show the effect of financial problem on E.B development based on record (job experience), and significance difference have managers whit 5-0 years record, believe more than others. In raw respondent are based on sex (gender), and don t show significance difference. They believe that financial problem don t effect on E.B development..4. Fourth Hypothesis: technical problems H0: technical problem is a barrier in E.B development is saman bank. H: technical problem is not a barrier in E.B development is saman bank. T=-.45 & significance level, sig = 0.084, show that there is not a significance relation between technical problem and E.B. So hypothesis is accepted. COPY RIGHT 0 Institute of Interdisciplinary Business Research

12 Table : Effect of technical problem on E.B based on variables VOL, NO 5 Frequency percent Standard deviation t Significance level Literacy Under Diploma and higher Record BA MAX more Under 5 year year Gender Upper than 5.7 4, 0 year Men Women First raw, shows respondents view based on educational background, and significance difference. Literacy record increases the view of them. Second raw, shows the effect of technical problems on E.B development based on job record, and with different literacy believes this. In line effect of technical problem on E.B development based on respondents gander shows significance difference mostly women believe effect of technical of technical problems on E.B development. Table : final ranking of index; effective on E.B development in saman bank Index Challenge Challenge ranking score Ranking of related Hypothesis Total ranking Lack of knowledge about E.B among customers Cultural-social 8.65 Lack of legal support Cultural-social 8.4 Lack of expert in the field of ELS Managerial barriers 8.6 Management interchange Managerial barriers COPY RIGHT 0 Institute of Interdisciplinary Business Research

13 Multi-centers of decision making Managerial 7.96 barriers VOL, NO 5 5 Site management sites Managerial barriers Connection networks with low speed Technological Lack of software and hardware Technological 7. 8 Non trust by customer about Electronic banking Cultural-social 7. 9 Lack of internet from ISP private Electronic banking Technological High cost of investment in the field communication Financial 4 6. High cost of development in the field of electronic terminal Financial High cost of updating networks Financial Result (of result findings).. Based on research result, hypotheses Hi with 95% confidence & 5% error was not accepted first and second hypothesis. So social-cultural problem & management problem are affective on E.B development. Financial & technical problem are not affective... Based on research result, management problem with the mean of 8/05 social cultural problem with the mean 7.79 technical problem with the mean 7/6 and financial problem with the mean of 6/ are order d based on E.B development... Index ranking is based on score in table 6 According to this table () the most important index is awareness of E.B users and high cost of updating the network has lowest importance. COPY RIGHT 0 Institute of Interdisciplinary Business Research

14 References VOL, NO 5. P. Nuri(87), electronic banking in Iran, challenges and problem, essay set of 9th Islamic banking conference, ps M.fathima, n.rastegar, r. bagheri asl(86), electronic banking problems and strategies in Iran, E.B conference. M. Yousefi, j.esmaeeli, review of Iran s banking condition and E.B problems. 4.S. manuchehri(84), review of banking result in performing electronic banking; set of essays in first conference of banking function interview to achieve the goal of economy, social and cultural development in Iran, p A.Gudarzi, h.zobida(87), review of effect of E.B development on efficiency of Iran banks benificery, magazine of Iran s economic result, 0th year; number 5; 87 summer p P.H.Amadeh, m. Jafarpor(88), E.B development problem and strategies in the frame of outline document of Iran 404, knowledge and development magazine 6th year, number M.R.Hamidizadeh, m, gharechi, A.abdol-baghi(86), review of E.B December challenges and problems factors, research magazine of humen & social science, 7th year, number R. Seyed javadin, M. Seghtchi (006), Period of changing in electronic banking in Iran, tadbir magazine, 8th year, number Sh.mohammadi, zare, hosseini(89), Internet banking security, khajeh nasir Industry university press, first publication. 9. A.shirani(84), set of essays, 6th conference of Islamic banking, Iran banking training institute press. 0. A. Alikhanzadeh(87), electronic banking, computer science press.. Electronic banking & money(85): review of Iran s banks, New technologies and relationship office of research center of Islamic council congress, number Electronical interchange of funds in Iran (8), Planning and economic review assistance of commercial ministration. 4. P. Kasturiratna, Internet Only Banking, rd National IT Conference Colombo, 9th July Akinci Serkan Aksoy, Eda Atilgan. (004), Adoption of Internet Banking among Sophisticated Consumer Segments in an Advanced Developing Country, International Journal of Bank Marketing, Vol., No.,pp-. 6. Ibrahimi, Shahed (00), The Obstacles of Electronic Banking in Iran, Thesis for MA, Faculty of Management & Accounting, Allameh Tabatabaei University; Tehran. PP (In Persian) 7. Wendy W.N. Wan, Chung-Leung Luk, Cheris W.C. Chow (005), Customers' Adoption of Banking Channels In Hong Kong, International Journal of Bank Marketing, Vol., No., PP Pennathar, Anita K. (00) E-Risk Management for Banks in Age of the Internet, Journal of Banking & Finance, No.5, p H.C. Lau,, M.A. Idris(00), The Soft Foundation of The Critical Success Factors on TQM - Implementation in Malaysia, The TQM Magazine, Vol., No., PP COPY RIGHT 0 Institute of Interdisciplinary Business Research 4