9

Kamel et. al (2001) stress e-banking is now a global phenomenon. It is an invaluable and powerful tool driving development, supporting growth, promoting innovation and enhancing competitiveness. Technological innovations have been identified to contribute to the distribution channels of banks and these electronic delivery channels are collectively referred to as electronic banking Chang (2003) states that the evolution of banking technology has been driven by changes in distribution channels as evidenced by automated teller machine (ATM), Phone-banking, Telebanking, PC-banking and most recently internet banking. The developed country as a part and parcel of their economy is now using electronic banking or online banking. There have a few customers are using internet banking facilities. A strong banking industry is an important in every country and can have a significant affect in supporting economic development through efficient financial services. Feinman et al., (2001) states that there have been several major challenges and issues faced to the e-banking growth and the e-business in general. One major obstacle addressed most is the security concern. Another issue challenged e-business (including e-banking) is the quality of delivery service - including both delivery speed and delivery reliability. Limited payment options available to online customers are also being complained. Burr (1996) describes that it as an electronic connection between bank and customer in order to prepare, manage and control financial transactions. E-banking is form of banking, where funds are transferred through an exchange of electronic signals between financial institutions, rather than the exchange of cash, checks, or other negotiable instruments. The ownership of funds and transfers of funds between financial institutions are recorded on computer systems

10

connected by telephone lines. Customers identification is by access code, such as a password or Personal Identification Number (PIN), instead of a signature on a check or other physical document. E-banking involves individual and corporate clients, and includes bank transfers, payments and settlements, documentary collections and credits, corporate and household lending, card business and some others Bruene (2002) stress that banking has never been more important to our society than it is today. The advance of communication and computer technology and the availability of the internet have made it possible that one can do most banking transactions from a remote location even without stepping into a physical financial structure - that is, the emerging of e-banking. The way Bill Gates (2008) announced that banking is essential, banks are not. This quotation means that the traditional bank branch is going to vanish in order to be surrogated by electronic banking which continues to attract new users. The banking industry believes that by adopting new technology, the banks will be able to improve customer service level and tie their customers closer to the bank. Meanwhile, Graven (2000) the banking industry has been also looking for new methods to expand its customer base and to counteract the aggressive marketing effort of those nontraditional banking entities. Larger banks that maintain expensive branch networks tend to have the greatest incentive to adopt e-banking services. In comparison, smaller banks have higher start up costs and tend to have a high initial technological cost in developing e-banking services. Halperin (2001) describeds that many banks quickly realized that there are a momentous number of customers like to do banking electronically. The application of e-banking has been proven as an effective way to reduce the costs of operation for the financial institutions. For

11

instance, e-banking services will allow banks to reduce expenditures on physical structures. It is believed that the e-banking will help banks to cut costs, increase revenue, and become more convenient for customers. Marenzi et al., (2001) noted another important benefit from e-banking is a more effective information collection and management. A combination of a low percentage of customers using e-banking services on a consistent basis and a relatively low start-up cost in developing ebanking services in the banking industry will make the impact of e-banking (positive or negative) quite limited on financial institutions Hughes (2001) states that the rapid advancement in electronic distribution channels has produced tremendous changes in the financial industry in recent years, with an increasing rate of change in technology, competition among players and consumer needs. Ibrahim et al., (2006) argues that the proliferation of, and rapid advances in, technology-based systems, especially those related to the internet, are leading to fundamental changes in how companies interact with customers. Internet banking has become the self-service delivery channel that allows banks to provide information and offer services to their customers with more convenience via the web services technology. Eriksson et al., (2008) states that the evolution of e-banking has fundamentally transformed the way banks traditionally conduct their businesses and the ways consumers perform their banking activities. Amato- McCoy (2005) stress that today e-banking has experienced phenomenal growth and has become one of the main avenues for banks to deliver their products and services. Chou and Chou (2000) identified five basic services associated with online banking: view account balances and transaction histories; paying bills; transferring funds between accounts;

12

requesting credit card advances; and ordering checks for more faster services that can be provide by domestic and foreign bank. E-banking reaps benefits for both banks and its customers. According to Sarel and Mamorstein (2003) from the banks perspective, e-banking has enabled banks to lower operational costs through the reduction of physical facilities and staffing resources required, reduced waiting times in branches resulting in potential increase in sales performance and a larger global reach. While Grabner-Kraeuter and Faullant (2008) states that from the customers perspective, e-banking allows customers to perform a wide range of banking transactions electronically via the bank's website anytime and anywhere. In addition, customers no longer are confined to the opening hours of banks, travel and waiting times are no longer necessary, and access of information regarding banking services are now easily available. However the success of ebanking isnt without its problems. White and Nteli (2004) argues that first, the adoption of e-banking has not kept pace with that of internet usage. This gap is attributed to the lack of trust among bank customers, particularly among internet users age 65 and older. Secondly, customers still prefer face to face interaction due to reasons such as fear of the online environment and lack of trust in the internet. Vatanasombut et al., (2008) added that the recent literature on e-banking showed that the formation of trust can help reduce the impact of key inhibiting factors such as fears about using the online service among non-e-banking customers. Following the boom of new technologies such as the internet and mobile phones in practice, e-banking has also been the focus of numerous academic papers Adoption, perception and usage of internet banking by consumers is one of the topics heavily examined in e-banking literature.

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Centeno (2004) argues that speed, the convenience of remote access, 7/24 availability and price incentives are the main motivation factors for the consumers to use internet banking. Durkin, et. al. (2008) notes that the simplicity of the products offered via internet banking facilitates the adoption of internet banking by consumers According to Eriksson et al (2007), banking has become the self service delivery channel that allows banks to provide information and offer services to their customers with more convenience via the web services technology The evolution of e-banking has fundamentally transformed the way banks traditionally conduct their businesses and the ways consumers perform their banking activities Today e-banking has experienced phenomenal growth and has become one of the main avenues for banks to deliver their products and services Pikkarainen et al (2004) define internet banking as an "internet portal, through which customers can use different kinds of banking services ranging from bill payment to making investments". According to Daniel (1999), he defines electronic banking as the delivery of banks' information and services by banks to customers via different delivery platforms that can be used with different terminal devices such as a personal computer and a mobile phone with browser or desktop software, telephone or digital television. Faller and Saloner (1986) installed based and compatibility. They argued that new technology can face excess inertia as installed-based users are somewhat tied to the old technology. This explains why new technology is not always taken up by the mass market Daniel (1999) states that electronic banking (e-banking), also known as Internet banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. E-banking

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includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the internet. Meanwhile Waterson (2000) high lightened one of the main differences between the banking industry and the motor car industry that one of the credit rating system. Bank specific credit rating system builds up over time while credit rating for motor insurance is transferrable between insurance companies. Thus, the long term aspects of credit rating in banking may explain why consumers are quite reluctant to switch banks. According to Ibrahim et al (2006), the proliferation of, and rapid advances in, technology-based systems, especially those related to the internet, are leading to fundamental changes in how companies interact with customers

Studies This portion presents the related studies conducted in the past that are related to the study being conducted by the researchers that may also serve as the basis of validity of this study.

Anne M Smith (2003) studied the four distinguishing characteristics of services intangibility, inseparability, heterogeneity and perishability and how it effects clients' perceptions of quality service from banks. The study revealed that intensifying competition and increasing customer expectations have created a climate where quality is considered to be a major strategic variable for improving customer satisfaction and thereby contributing to the profitability of financial service providers.

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According to Laroche and Manning 2006, Location convenience, speed of service, competence and friendliness of bank personnel scored most of the points with maximum value in banking services. Aurora and Malhotra (2007) studied the level of customer satisfaction and some marketing strategies in both private and public sector banks. They have found six factors of customer satisfaction in public sector banks, routine operations, price, situational, environmental, technology, and interactive. But in private sector banks, they found seven factors in total, having staff factor as the first ranked and situational factor as the lowest ranked items. Instead of price factor, promotional factor has been explored by researchers in private sector banks. As compared to public sector, private sector bank customers level of satisfaction is comparatively more. Proper training and development of bank staff, regular market survey, personalizing the service, efforts to avoid long queues in bank, and attractive environment are key suggested strategies in public sector bank. Geiger's (2005) carried out study to establish the needs of customers. Social status of the bank's customers and the perception that the customers had of banks were studied along with customers judgment of the range of services that the banks had to offer, the effectiveness of various advertising and other sales promoting measures, and the customers' will to save and other habit. Findings indicated that satisfied customers are more optimistic in nature than those who are critical of what their banks have to offer them. Lewis and Birmingham (2001) studied the needs, attitudes and behaviour of youth market for financial services and found that the youth market is not homogenous in terms of needs and behaviour.

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On the other hand Rajagopla Nair (2004) in his study on rural bank marketing found that security and liquidity are the major pre-requisites for deposits by rural customers and that the interest rate on fixed and demand deposits is not at all a criterion for rural bank depositors to deposit their savings with commercial banks. Huu Phuong Ta and Kar Yin Har (2002) studied bank selection preferences of undergraduates in Singapore. In the study, nine criteria for selecting bank and five banks were identified, and the decision problem was structured into a three-level hierarchy using the Analytic Hierarchy Process. The findings indicated that undergraduates emphasize more on the pricing and product dimensions of bank service. Roger (2006) studied customer satisfaction in banks and found banks should target and serve only those customers whose needs it can meet better than its competitors in a profitable manner. By adopting this strategy customers will be retained for longer periods, consume multiple products; recommend the bank to their friends and relations who may be the source of superior returns to the banks shareholders. Mishra examined (2005) in his paper explained the advantages and the security concerns about internet banking. The improved customer access, offering of more services, increased customer loyalty; attracting new customers are the primary drivers of internet banking. But in a survey conducted by the online banking association, member institutions rated security as the most important concern of online banking. In a study conducted by Suh and Han (2002) titled the impact of trust on the acceptance of internet banking by customers, trust has been considered another criteria that affects the acceptance of e-banking. This study was done on 845 cases on the internet and studies the

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behavior of users of e-banking. The results of analysis and statistical studies using modeling of structural equations indicated that trust has a significant impact on the acceptance of e-banking. Another study conducted by Kim, Ferrin, Rao (2008) was indicated that customers trust in the internet and their perceived risk have significant impacts on their shopping decisions. The position of the customer with regard to trust, credit, concerns about privacy, concerns about security, quality of the information of websites and the credit of customers have significant impacts on the trust of internet customers of a website. Calisir and Gumussoy (2008) examined and compare the consumer perception of internet banking and other banking channels and report that internet banking, ATM and phone banking substitute each other. Maenpaa et.al. (2008) examined the consumer perceptions of internet banking in Finland and their findings indicate that familiarity has a moderating role in the perception. Guerrero, et,al. (2007) examine the usage of internet banking by Europeans and their results indicate that ownership of diverse financial products and services, attitude towards finances and trust in the internet as a banking channel influence clients usage of internet banking. Confirming other papers, Sohail and Shanmugham (2003) document accessibility of internet, awareness of e-banking and resistance to change are found to be influencing Malaysians use of internet banking. Another factor that promotes clients usage of internet banking is seller support. Polatoglu and Ekin (2001) examined that the perceived risk was one of the major factors affecting consumer adoption, as well as customer satisfaction of online banking services. Perceived risk usually arises from uncertainty. To Howcroft, et. al., (2002) studied the principal characteristics that inhibit online banking adoption are security and privacy. In Malaysia it was found that security was main

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barrier to e-commerce expansion. Security is perhaps the most feared problem on the internet. Banks and customers take a very high risk by dealing electronically. It is noted that although consumers confidence in their bank was strong, yet their confidence in the technology was weak. Today consumers are increasingly more concerned about security and privacy issues. Potential customers mentioned Internet security, online banking regulations, consumers privacy, and banks reputation as the most important future challenges of online banking adoption. Indeed, in Aladwani (2001) study of online banking, potential customers ranked internet security and customers privacy as the most important future challenges that banks are facing. Perceived usefulness, perceived Web security has a strong and direct effect on acceptance of internet banking, too. According to the study of Ostlund (2004) a high level of perceived risk is considered to be a barrier to propagation of new innovations. Influenced by the imagination-capturing stories of hackers, customers may fear that an unauthorized party will gain access to their online account and serious financial implications will follow. The survey by White and Nteli (2004) found that UK consumers ranked the security of banks website as the most important attribute of internet banking service quality. This widespread anxiety is vividly illustrated by the results of the study of Sathye (1999), who reported that three-quarters of Australian respondents expressed security concerns with regard to electronic banking. Overall, the literature appears to be unequivocal in its finding that the level of perceived risk is negatively related to the attitude towards banking on the World Wide Web (Gerrard et al., 2006). For this reason, this study uses perceived security as a predictor of customer acceptance.

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Sayar and Wolfe (2007) reported a majority of studies highlight the fact that security is the biggest single concern for customers when faced with the decision to use internet banking. Security has always been an issue, but its scope has changed from mere doubts about the privacy of personal information to worries of financial loss. White and Nteli (2004) find that security is the most important attribute for UK internet banking customers. It is followed by responsiveness of service delivery (speed and timeliness), ease of use, credibility of the bank, and product variety. Akinci et al. (2004) find that the selection of an internet banking service provider is effected by security, reliability and privacy. Security, which involves protecting users from the risk of fraud and financial loss, has been another important issue in safe use of the internet then conducting financial transactions in Saudi Arabia. According to the study comducted by Shakil (2000), which was entitled E-Banking: A Case Study of Askari Commercial Bank in Pakistan, he found out that the respondents or the samples he used on his study were not yet ready to adapt the so called E-banking system thats why the satisfaction level in E-banking is low. And also due to the lack of trust in technology and low computer literacy in Pakistan, people are hesitant to use or adapt the said banking system, which is the E-banking. He recommends that the internet rate must be reduced in order to promote the benefit of E-banking system to the media, customers and as well as the banks itself. Based on the study held by Mayer (2003), which was entitled Online Banking and Research: A State of Play in 2003, the European country is the most enthusiastic online bankers in the world. Results also shows that women are less likely to engage in online banking compared to men. He also found out that E-banking is really a big help to those people specially

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working people, to transact in banks personally. He recommends the continuous adoption of Ebanking in those countries who are using it. In the study conducted by Hasan et al. (2000), which was entitled Adoption of Ebanking in Bangladesh, he found out that E-banking has a lot advantages to Bangladeshi. However, since the Bangladeshi customers have not enough knowledge regarding the E-banking, it is not proven as really effective. He recommends that must focus on imparting knowledge to the Bangladeshi in order for them to enjoy the numerous benefits of E-banking. According to the study of Haque et al. (2003), this was entitled Electronic transaction of internet banking and its Perception to the Malaysian online customers, he found out that only protected transactions have high impact to the customers of E-banking. It is followed by service quality and regulatory framework issues. He recommends that E-banking should be more practical and acceptable. This also signifies significant contribution of knowledge in relation to customers perception of the problems and prospects of E-banking. Based on the study conducted by Siddik et al. (2004) regarding the topic A study regarding customer satisfaction on E-banking services to ICICI bank in Chennai city, the results of their study showed that there was quite been a positive opinion regarding the common problems faced by e-banking users. But if it will be compared to the problems faced by them in engaging through personal transaction like the delay of service, the service rendered by the staff, etc., their respondents will prefer e-banking more. According to Liang et al (2004), the service quality attributes are of two types; one is product related, and the other one non-product related. These attributes may create the perception of symbolic, functional or experiential benefits among customers. The study results strongly

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highlighted the fact that customer satisfaction positively affects customers trust and commitment on service provider, which in turn affects customers behavioural loyalty. Sarin and Anil (2007) recommended that manpower in service organizations must work with the focus of satisfying the customer. Banking should bring out the areas requiring improvement and further throws light on the measures so that customers feel should be adopted in order to improve the quality of services. Boyd et al (2004) conducted a study on consumer choice criteria in financial institution selection in USA and found that reputation and interest rates of loans as well savings rates are more important than friendliness of employees, modern facilities and drive - in - service.

According to the study Tan and Teo (2000) if customers are given the chance to try the innovation, it will minimize certain fears, especially when customers found that mistakes could be rectified and thus providing a predictable situation. A more rapid diffusion occurs when consumers can have low-cost or low-risk trial of the service. Internet banking services are free. The cost and risk to trial are relatively low especially when Internet access is available from work. According to study of Centeno (2003) Banks offer Internet banking mainly to increase cost-effectiveness, increase customer reach, and retain market share. Also according to Turban (2000) Internet banking is extremely beneficial to customers because of the savings that can accrue in the costs, time, and space it offers, its quick response to complaints, and its delivery of improved services. It is clear that the internet provides excellent new opportunities for the banking industry in terms of it being able to reduce long-term overhead costs and offer improved services.

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Another study was also conducted by Teo and Liu (2004) titled customers trust in ecommerce in the US, Singapore, and China, which investigated the history and consequences of consumers trust in these countries. The results indicated that the credit and trustworthiness of the system of an internet seller and the position of the customer towards trust have positive correlation with customer trust. Customer trust has also positive correlation with attitude and has a negative correlation with perceived risk.

RELEVANCE OF REVIEWED LITERATURE AND STUDIES TO THE PRESENT STUDY

According to Daniel (1999), he defines electronic banking as the delivery of banks' information and services by banks to customers via different delivery platforms that can be used with different terminal devices such as a personal computer and a mobile phone with browser or desktop software, telephone or digital television. E-banking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the internet. Customers access E-banking services using an intelligent electronic device, such as a personal computer (PC), personal digital assistant (PDA), automated teller machine (ATM). There is faster delivery of information from the customer and service provider, thus differentiating Internet enabled electronic banking system from the traditional banking operation This transfer process makes money to be carried in information storage medium such as

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cheques, credit cards, and electronic means than its pure cash form. Ebanking has thus become important channel to sell Products and Services; leading to a paradigm shift in marketing practices, resulting in high performance in the banking industry. This shows that if banks provide them necessary guidance and ensure safety of their accounts, customers are willing to adopt e-banking

CONCEPTUAL FRAMEWORK The conceptual framework shows the relation of the manual banking transaction to the existing E-banking transaction. According to Daniel (1999), he defines electronic banking as the delivery of banks' information and services by banks to customers via different delivery platforms that can be used with different terminal devices such as a personal computer and a mobile phone with browser or desktop software, telephone or digital television.

Research Paradigm
E-BANKING
MORE ACCESSIBLE, MORE CONVENIENT, MORE ACCURATE

TERMINAL DEVICES e.g. cellphone, internet, telephone

BANKS

SERVICES AND INFORMATION

DEPOSITORS

Figure 1 Research Paradigm

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Figure 1 shows the effectiveness of electronic banking to the depositors. Banks renders services and information to their depositors with ease, with the use of terminal devices such as cell phones, internet-connected computers and telephones. The channels that these terminal devices provide more accessibility and convenience as customers can easily get in touch with the bank itself and make transactions without wasting time and energy on getting on the nearest branch of the bank, and more accuracy as information will go through certain security applications that the bank adapts.