Building customers confidence toward Internet Banking in Maybank Group : Case Study in Kuching Branch.

Transcription

1 Building customers confidence toward Internet Banking in Maybank Group : Case Study in Kuching Branch. BY SHELLA GEORGINA BEATRICE ANAK VERNON NYANA (Matrix No.:0 l ) A Research Paper Submitted in Partial Fulfilment of the Requirement For the Degree of Corporate Master In Business Administration Faculty of Economics and Business Universiti Malaysia Sarawak (2003)

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17 Chapter 2 : Literature Review This chapter presents some evidences from previous research of customers confidence in internet banking. Several related issues are discussed such as the electronic evolution, consumers perception of electronic banking, customers satisfaction, trusting the online banking interface and customers behavior and confidence in E-Saving Account Service. The discussion on the customers confidence in internet banking is conducted by looking into previous studies. The focus of the study is to determine factors that influence customers confidence in intemet banking. This is followed by the expectation of the customers on internet banking. 2.1 Electronic evolution Electronic commerce is now thought to hold the promise of a new commercial revolution by offering an inexpensive and direct way to exchange information and to sell or buy products and services. This revolution in the market place has set in motion a revolution in the banking sector for the provision of a payment system that is compatible with the demands of the electronic marketplace. The electronic revolution in banking basically centers on changes in the distribution channels of tinancial institutions. The basis for the emergence of the modern electronic distribution channels is the result of the evolution of the concept of money. It is important to appreciate at the outset that money as it is defined today is just simply information, which can be electronically transmitted to facilitate economic transactions. It is this new definition of money, which has resulted in the electronic revolution of financial institutions. According to Pang (1995), computerization in the Malaysian banking industry got off to a slow start and only picked up momentum in the 1970 s. The increasing volume of banking transactions was the inevitable motivator for the introduction of computers in Malaysian commercial banks. By linking up technological developments in the telecommunications and Information Technology, real-time on-line electronic funds transfer came into existence.

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20 IO as, withdraw, transfer, and print their statement via Internet-based computers and printer from home and/or work place. By using e-saving account, both customer and the banks can save their time and costs in waiting line and traveling expense for updating savings deposit passbooks over the counter inside the bank (Chanaka & Paul, 2000) Internet Banking in Other Countries In order to understand basic Internet banking services available around the world, the next section presents summary of literature review on Internet banking services in the United States, United Kingdom and Asia Pacific Internet Banking in the United States According to Stegman (1999), an average cost for conducting one full banking transaction service over the counter inside the Bank in the United States is US$ 1.07 in The use of new technological-based via online banking service has reduced similar transaction cost to US$ 0.04 via telephone, to US$ 0.27 via ATM, and to US$ 0.01 via Internet-based personal computer. By 2001, there were more than 14 million customers who used banking on-line service via the Internet (Stegman, 1999) Internet Banking in the United Kingdom and Europe In the United Kingdom, Internet banking services are available and provided by twelve Internet banking services providers, Many banks continue to develop and launch new banking services on the Internet in order to satisfy and meet their Internet-based customer requirements in term of time, ease of use, security and privacy in the U.K. (Birch and Young, 1997; Mathew and Dagi, 1996; Gandy and Brierley, 1997). Most of customers in the U.K. and European countries use Internet banking services to inquiry about their outstanding balances in saving and checking accounts, and details about their latest or last transactions for their daily reconciliation, The frequency to access the customers account per day is quite high. Many banks, therefore, have provided many view only features for customers to inquiry and view the information on their accounts as often as they want per day. As a result, the banks have reduced both operating costs and work hours for their staffs at call centers and local branches for frequently asked (FAQ) and repetitive transactions.

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22 Therefore, management of customer requirement is vital to development of rational for the banks to initiate, explore and develop Internet banking services that meet their needs and changes. 2.2 Level of customer service It was reported that a Cybercitizen Finance Study by Cyber Dialogue had indicated that as at the end of 1998 though the number of consumers banking online had grown to 6.3 million, 3.1 million US adults had also discontinued their use of online banking. More than 50% of those who had discontinued, found the service too complicated or were dissatisfied with the level of customer service. The banks should in fact ensure that consumption of the services through these new delivery channels are simple, easy and of sufficiently high quality to ensure customer satisfaction in order to maintain their online customers. Another problem associated with electronic banking is electricity power cuts which can be disruptive. The customers must also be made to feel confident about the privacy and security issues associated with electronic banking. According to a survey by Kori L (1998), the number of internet users over the age of 16 increased from 58 million at the third quarter of 1997 to 79 million at the end of the second quarter of A recent study indicates that 40 percent of the internet users are willing to conduct a financial transaction on-line. Innovations in technology hold great promise for improving the quality and functionality of on-line services. Technological developments have introduced tremendous changes in the ability of financial and non financial firms to efficiently collect, store, use and sell information about their customers. This has heightened concerns about the potential for violations of personal privacy. 2.3 Customers satisfaction According to Faramarz (2001 ), customer satisfaction was a key reason for the Bank of Montreal to launch Mbank, an online banking service and it paid off. According to the bank, more than 150,000 customers used the banks service and their customer satisfaction level increased from 70 percent to 95 percent. At present, there is little consumer protection on the intemet Consumers must basically trust the company they are dealing with is actually who claims to be, is located where it claims to be and will provide the product and after-sales service it commits to. 12

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24 14 banking and so usage patterns could change suddenly. Internet banking could have significant effects on the structure and performance of the banking industry. Security of Internet transactions is of paramount concern to most customers particularly where financial information is involved (Hedberg and Taylor, 2001; Stafford, 2001). Banks must convince their customers that their web sites are secure and sufficient safeguards have been taken to assure security at the transaction level. Also, safeguarding the privacy of customer s financial information and profile are imperative if the public is to embrace Internet banking. The Office of the Comptroller of the Currency (OCC) released a new handbook outlining procedures for examining banking activities at national banks (ABA Bank Compliance, 1999). Issues in the handbook include customer privacy, threat of intrusions from hackers, and issues surrounding the interrelationship of customer anonymity on the Internet and banks responsibility to monitor suspicious activities under the Bank Secrecy Act. Additionally, a report by the General Accounting Office (GAO) revealed 8 1 bank examinations by the FDIC, Fed, OCC and OTS and found that 36 banks (44%) had not fully adopted Web banking risk measures proposed by regulators (TMA Journal, 1999). These security measures include inadequate agreements with third party vendors, insufficient strategic planning, and incomplete audit procedures for the online banking system. The highly developed and sophisticated encryption technology that is available today points to a lack of clearly defined security policies in place, rather than an overall technological issue concerning security. By implementing the available security technology in the appropriate manner, the safety and security of an Internet bank should not pose a severe risk to the accounts of individuals. 2.5 Users Discontinue Service A recent study found that almost a third of the 9.4 million people who signed up for online banking (including through the Internet and dial-up accounts) discontinued their service for a variety of reasons (Redman, 1999): online banking was too time consuming (27%); unhappy with customer service (25%); no need or interest in the service (20%); too costly (1 I%), and concern for privacy (5%). This study also noted that only 35% of those who discontinued the service said that they would try