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Online banking is a growing part of E-Commerce which provides interactive services such as accessing account summary information, paying bills and accessing other banking products and services (Kelaart-Courtney, 2005:1).
October 18 1995 Security First Network Bank opened to the public as world's first Internet bank (Cronin, 1998:75). Banking executives needed to find more cost effective delivery channels to overcome limitations of labor intensive, high cost branch banking models. Th world wide web with its ubiquitous browser based access offered a completely different delivery model for banking, one in which customers could tap into their accounts to conduct transactions at any hour (Cronin, 1998:77).
Online banking provides the opportunity for bank customers to find out information or make a payment when a visit to a branch is not convenient (McGraw-Hill, 2002:114).
For the bank, it reduces the cost of processing each transaction and has the potential to enable the bank to reduce the overhead of the branch network (McGraw-Hill, 2002:114).
While online banking can provide considerable convenience for users who require out of branch banking facilities, the user is also vulnerable to potential risks of virus attacks, unauthorised access, fraudulent transactions and identity theft (Kelaart-Courtney, 2005:1).
The use of the Internet, young prosperous customers may require and can certainly cope with. For the old and the poor, these developments are less liley to be welcome. There is a problem of exclusion from financial services and the retrenchment of the branch network (ie country towns closing branches) will do nothing to help the situation. Social exclusion is a growing problem both in and for society (McGraw-Hill, 2002:117).
Companies that take advantage of targeting the appropriate customers with the products and services customised for them, this will have a lasting competitive advantage. Electronic delivery of these products and services will be one of the means of achieving this edge because it provides convenience and ability to customise products and services on a mass scale. (Cronin, 1998:25)
1. New distribution channel
The reach and delivery capabilities of computer networks such as the Internet, far exceeds any proprietary bank network ever built and makes it continually easier for customers to manage their money anytime, anywhere (Cronin, 1998:20).
2. No barriers to entry
Through increased technology, a trend can be seen in the area of bill paymens where recent innovations have provided an opportunity for non-banks to break into the banking business, threatening one of the most profitable services provided by banks (Cronin, 1998:20).
In the borderless "marketspace" of the Web economy, any business can go global with unprecedented ease and low costs. E-Commerce will reduce the barriers that distribution channels traditionally offered the market leaders. The barriers represented by channels, particularly to smaller manufacturers that lack volume and economies of scale to create end-user demand and by limited shelf space, mind share, or financial resources, are eliminated. With E-Commerce, the shelf space is virtually unlimited and the networks will probably compete on the basis of the number of manufacturers and products represented (Savoie, 1999:247).
3. Changing customer expectations
Customers want to bank at their convenience and want banks to provide more interesting financial products. This change is evident in the increased purchase of investment products and has been one of the fastest growing industries (Cronin, 1998:24).
New technology has not only enabled an ever increasing range of products, it has also had far reaching effects on consumer expectations. Fincancial institutions understand that to meet these expectations, they need to be flexible by separating the content (fincanical product) from the distribution channel (the branch). Th traditional model of one stop integrated financial shopping has outlived its usefullness and is keeping banks from being agile enough to meet new consumer demands (Cronin, 1998:20).
4. Digital convergence of financial management
Technology has enabled a convergence of a broad range of financial management activities that previously were consuidered disparate. Only recently has software been written that makes it possible to perform diverse transactions throuhg one common interface (Cronin, 1998:20).
Few managers have a clear vision of tomorrow's banking environment. Few institutions have strategic plans in place today that anticipate the future of online banking. The challenge for the banking industry lies in creating the right incentives for customers to ues PCs regularly for banking (Cronin, 1998:22).
Financial instutions today have reason to worry that if they do not offer online banking services, affluent customers will look to competitors. In addition to wanting to protect their existing franchise, financial institutions can look to online and related services to expand their product offerings and win new business (Cronin, 1998:73).
Cronin, M. 1998. Banking and Finance on the Internet. John Wiley and Sons; Canada, ISBN 0471292192.
Kellart-Courtney, G. (2005, June 23) "Internet banking: When you thought it was safe," ITP Technology, retrieved August 2, 2005, from http://www.itp.net/features/details.php?id=2839&category=
Rayport, J. F. (2002) Introduction to E-Commerce, Boston: McGraw-Hill/Irwin marketspaceU, ISBN 0072510242.
Savoie, M and Raisinghani, M. 1999. "Identifying future trends in information technology". Industrial Management and Data Systems. Vol.99, Iss.6.
Anna Caldwell 19:29, 26 Oct 2005 (EST)
