E-banking in transition economies: The case of Romania

Received (in revised form): 13th November, 2001

Calin Gurau
specialises in the areas of international marketing, Internet marketing and high technology marketing. He is a Junior Fellow of the World Academy of Art and Science and a Fellow of the Salzburg Seminar. He has published more than 20 papers in national and international journals, on international marketing, Internet marketing and Internet strategies and biotechnology business. Since September 2000 he has been Lecturer in Marketing at the School of Management, Heriot-Watt University, Edinburgh.

Abstract Internet banking is one of the newest Internet technology applications, which promises multiple benets both for the nancial institutions and for clients. In the last ve years a large number of banks have launched websites, oering online banking services. While the implementation and functioning of these digital systems seem to be relatively smooth in the developed economies, the situation may be dierent in countries with economies in transition. The present paper investigates and analyses the specic conditions of an economy in transition (Romania), and the appropriate strategies for the implementation and use of e-banking services. Keywords E-banking, transition economies, Romania

INTRODUCTION The explosive development of the Internet is following three main directions: 1 increased penetration of the Internet, in terms of number of connection lines and/or users 2 increased richness of the Internet, in terms of information 3 increased diversication of the Internet, in terms of applications. One of the most promising new applications of Internet technology is Internet banking. Exploiting the new communication/transaction channels oered by the Internet, in the last ve years the number of bank websites has increased rapidly. At present there are available online more than 1,500 sites of banks from all over the world. The

Calin Gurau Lecturer in Marketing, School of Management, Heriot-Watt University, Riccarton, Edinburgh, EH14 4AS, UK. Tel: +44 (0)131 451 3587; Fax: +44 (0)131 451 3296; e-mail: c.gurau@hw.ac.uk

majority of banks with Internet presence are from the USA, while in Europe the largest number of banking websites are in the UK, Germany, Spain, Italy and France. Despite the growing interest in the introduction and development of Internet banking, there is little research being done on the implementation of Internet banking in transition economies. Most of the papers dealing with this subject only present general information without attempting to analyse primary and secondary data in a systematic way (see www.enance.ro). These countries, many of them with a fairly developed nancial and technological infrastructure, experience specic market conditions in terms of knowledge, technological abilities, business ethics and Internet regulations, as well as consumer cultural and economic dierences. Because of this, the implementation strategy of

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E-banking in transition economies: The case of Romania

Table 1 Main macroeconomic indicators7 Indicators GDP at constant prices (% change) GDP per capita (US dollars) Inflation (change in year-end retail / consumer price level in %) Exchange rate (lei / US dollar end year) 1991 1992 1993 1994 1995 1996 1997 1998 1999

12.9 1,187 223

8.8 857 199

1.5 1,159 296

3.9 1,324 62

7.1 1,573 28

3.9 1,437 57

6.1 1,521 152

5.4 1,843 41

3.2 1,515 55

189

460

1,276

1,767

2,578

4,035

8,023

10,950 18,255

online banking, which is straightforward in a developed economy, might be dierent and more dicult in a developing country, requiring specic objectives and additional costs. This paper attempts to present and analyse the situation of e-banking in Romania, using this example to identify the procedures and criteria which may inuence the introduction of a successful e-banking system in transition economies. ECONOMIES IN TRANSITION: ROMANIA The end of the 1980s and the beginning of the 1990s witnessed dramatic changes in the social, political and economic structure of Europe.2 The Central and Eastern European countries have eliminated their communist regimes and have started their transition process towards a market economy and political democracy. During the last 11 years enormous changes have been experienced in all the countries of the former Eastern bloc. At present, in most countries of Central and Eastern Europe there are democratically elected governments which are committed to establishing market economies based on pluralist property forms and free competition. These reforms have been hindered by high levels of ination, unemployment and economic instability determined by the restructuring of the national economic systems. As expected, the pace and the success of reforms is not

similar in all these countries.3 While Romania is often portrayed as a poor country, this image does not do justice to its large development potential. With over 22 million inhabitants, Romania has the second largest population (after Poland) in Central and Eastern Europe, and a large stock of skilled labour.2,3 It also has a generous endowment of natural resources, notably including energy and agricultural land. Economic conditions in some areas are comparable with those of more advanced countries in the region. Romania has also experienced some periods of rapid growth and economic prosperity in the past.4,5 Romania remained excluded from the economic reform debate which characterised the 1980s in other socialist countries. The transition shock was, therefore, particularly great.6 In two years, the GDP fell by around 20 per cent and industrial output by more than 50 per cent.6 In the immediate outset of transition, Romania not only lost most of its former COMECON market, but was also aected by the UN sanctions against other traditional export markets such as Iraq and the former Yugoslavia. A gradualist approach to structural reforms was adopted by Romanian governments. This strategy was intended to minimise the social costs of transformation of the previous economic and institutional structures. But, the results of the transition process revealed that this was not a successful approach to reform in Romania.6

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The country has experienced high levels of ination, a slight increase in the GDP per capita, and a constant devaluation of the national currency (lei). This had a negative eect on the internal nancial stability and has reduced substantially the purchasing power of Romanian citizens. Foreign direct investments have increased constantly, however, even if the growth was less than in other Central European countries.8 In 2000, the GDP growth rate has again registered positive gures (1.6 per cent), after a three-year period of economic decline (19961999). The growth was greater in the export-oriented industrial sectors (the growth rate of industrial production was 8.2 per cent and that of exports 22 per cent). At the same time the strong currency reserves of the National Bank have grown by $950m and those of the others commercial banks by $290m.9 INTERNET BANKING: ADVANTAGES AND PROBLEMS Using the Internet, people can access their banking accounts and conduct transactions 24 hours a day, seven days a week, with reduced costs and increased convenience. On the other hand, due to the explosive development of the digital environment,
millions
25 20 15

the banks now have the opportunity to expand their market penetration internationally. A study completed by Datamonitor estimates that at the end of the year 2003, 10 per cent of the world population (approximately 545 million people) will have Internet access. Taking advantage of this favourable situation, many nancial institutions have launched corporate websites, oering personalised online services. Customers can view account balances and previous statements from their PCs and download data into personal nancial management software such as Quicken, Money, and Managing Your Money. The e-banking services also oer the possibility of opening new accounts or direct deposits, ordering cheques, changing addresses, or paying bills online.10 All these operations are secured through encryption, rewalls, ltering routers and personal identication numbers.11 Table 2 shows ve examples of UK banks oering e-banking services. Online banking services are not only implemented by large nancial institutions; starting as recently as in 1997, many small banks have opened websites (eg State National Bank of Big Springs, Texas).11 Internet banking oers multiple advantages to banks, as well as individual clients and corporate clients (See Table 3). The role and content of banks websites

Europe 10 5 0
Figure 1

USA

1998

2002

The evolution in the number of Internet banking users (Forrester Research, 2000)1

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Table 2 Examples of UK banks providing e-banking services12 Online bank Barclays Online Banking Pros Intuitive processes make transactions easier to perform Cons PC Bank 2.0 can be confusing Verdict Within the limitations of online banking, the package is among the best The Internet banking service is a step in the right direction, but limited functionality offers only minor time savings Despite a reasonable range of functions, it is hard to keep track of transactions on the user interface Good service but it has few functions compared with the other online services presented here Intuitive and welldesigned software makes using a First Direct account straightforward Website address www. barclays.co.uk

Co-operative Internet Banking

Internet-based; immediate access, no initial setup or software charges

Limited facilities; fund transfer and bill payments require prior setup

www. cooperativebank.co.uk

Bank of Scotland Good housekeeping and Office functions Banking Service

Slow modem connection; unintuitive user interface; not a 24-hour service Limited functionality

www. bankofscotland.co.uk

Royal Bank of Scotland Direct Banking by PC

A well-designed and secure service

www.rbs.co.uk

First Direct PC Banking

Excellent interface; no software or service charges

Becomes operational only 14 days after registering; no additional features to First Directs phone banking system

www.firstdirect.com

Table 3 The advantages of Internet banking1 Advantages The bank Improved market image perceived as leaders in new technologies implementation Reduced transaction costs Better and quicker response to the market evolution Increased market penetration the online banking service can be accessed all over the world The use of the Internet site to advertise/sell new financial products Reduced costs in accessing and using the banking services Increased comfort and time-saving transactions can be made 24 hours a day, without requiring physical interaction with the bank Speed of transaction Better administration of funds the history of transaction is registered on digital support and can be analysed before a new transaction is initiated Reduced costs in accessing and using the banking services Quick and continuous access to information Increased comfort and time-saving transactions can be made 24 hours a day, without requiring physical interaction with the bank Speed of transaction Better administration of funds the history of transaction is registered on digital support and can be analysed before a new transaction is initiated

The individual client

The institutional client

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Type of access Internet banking services Online transactions

Offline interactive site Customised contact with the client; online communication through e mail Simple web presence Static pages with general information about the bank Time
Figure 2 The evolution of the banks web presence1

is evolving over time. Most banks start with a simple web page comprising general information about the bank and its services, gradually introducing online communication facilities with the customers and then a full range of Internet banking services (see Figure 2). The cost of online applications increases with the complexity of the site (see Figure 3). On the other hand the increased complexity of online applications permits better targeting and servicing of customers (implementing customer relationship management functions), which in turn

increases the competitive advantage of the bank. A study conducted by Faulkner & Gray1 has shown that most of the existing bank websites are informational. Around 20 per cent of the bank sites oer the possibility of limited transactions (self-service), and only 1.58 per cent have implemented a complex transactional site. Finally, only 0.56 per cent of the surveyed banks oer highly customised online applications. On the other hand, analysing the barriers against the introduction and development of online banking services,

2000-2005 Transformation 1998-2003 Transactions 1997-2000 Interaction 1996-1999 Presence General information Cost: $5K - $500K Interactive communication Web search engines Possibilities for personalised calculus Cost: $500K-$5M Online access to personal accounts Online transactions Support for other financial services Customisation Self-service CRM applications Advanced customisation Long-term sstrategy Distributed Internet network

Cost: $5M-$50M+

Cost: $50M-$150M+

Figure 3 The relation between cost and web-site complexity in Internet Banking. (Source Gartner Group)

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% 90 80 70 60 50 40 30 20 10 0 1998 1999
Figure 4 Problems experienced by the suppliers of e-banking services. Source: KPMG European Research Report, November 199913

Securit y fears Low skills level Fears over on-line customer s Cost implications Lack of knowledge of benefits

two main categories can easily be identied: factors aecting the suppliers of banking services factors aecting the customers. A study undertaken by KPMG Europe13 on a sample of 357 institutions, has identied some problems experienced by the banks (see Figure 4). Security seems to be the most important problem. This is understandable considering the number of security breaks experienced in the last two years by a number of major European banks.14 The lack of knowledge about the benets of online banking is increasing fast, as an eect of the promotion campaign launched in the last three years by many banks and nancial institutions. For the clients, the four main reasons to avoid online banking services are:13 security (25 per cent) their bank is not oering online services (20 per cent) they prefer the personal contact with the bank (18 per cent) the benets of online banking are not obvious (16 per cent).

According to a survey by Deloitte Consulting, less than one-third of customers rate e-banking as an important service, and of those only 22 per cent actually use it. A more discouraging fact for many banks is the fact that more than 30 per cent of customers do not even know whether their bank provides online services at all.15 Despite these problems nancial institutions and analysts are optimistic about the future of online banking. The solution to more popular online banking services is the education of the customer, the improvement of Internet security and the formulation of a better customeroriented oer.15 THE ROMANIAN BANKING SYSTEM At present, the Romanian banking system consists of the National Bank of Romania and 41 commercial banks.16 After an extremely dicult period experienced by the Romanian banking system between 1998 and 1999 (seven commercial banks have been removed from the Bank Register during this period and several others have experienced serious nancial problems), the situation substantially improved in 2000 and 2001. This change

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has been determined by the introduction at the end of 1999 of a complex set of strict regulations regarding the role of supervision and control of the National Bank of Romania upon the activities developed by the commercial banks. The risk to the Romanian nancial system has been reduced allowing a quick recovery and development of the private commercial banks.9 Nowadays, as a result of a series of important privatisation initiatives, the majority of Romanian commercial banks are private (out of 41 banks, only three are controlled by the state). Private capital represents 60.5 per cent of the entire capital invested in the Romanian banking sector (of which 35.9 per cent represents foreign private capital) and 57.9 per cent of the Romanian banks assets.9 THE ROMANIAN INTERNET INFRASTRUCTURE In terms of Internet infrastructure Romania, with Bulgaria and Croatia, is in the forefront of Eastern Europe, with levels approaching those of their Central European neighbours (Czech Republic, Hungary, Poland, Slovakia and Slovenia) in several key factors. These are secure servers (Romania 21); Internet services (Romania 25 per cent); information backbones (direct bre optic links to major European backbones; Romania operates the only Internet exchange in the region, based in Bucharest); and Internet hosts (Romania 1,613 per million inhabitants).17 RESEARCH METHODOLOGY The research presented in this paper was conducted during July and August, 2001. The rationale for this research was to: identify the macroeconomic factors that inuence the success of e-banking implementation in Romania

dene the prole of the e-banking user in Romania (institutional versus individual users, age, level of education, Internet knowledge and skills). A number of secondary information sources were rst accessed and consulted in order to evaluate the general state of the Romanian economy, the Romanian banking system, the Internet infrastructure in Romania, and the banks that have already introduced an e-banking system. Following this, the 41 banks operating in Romania were contacted personally or by telephone, in order to organise interviews with bank representatives. As a result of this, 14 semi-structured interviews were conducted with bank managers and other bank personnel from 11 banks, either directly or by telephone. The most important issues highlighted during these interviews were then discussed further with a number of randomly selected bank customers. The sampling procedure applied was quota sampling (50 per cent institutional clients and 50 per cent individual clients). The bank clients were randomly approached in dierent banks buildings in the cities of Oradea and ClujNapoca, and were asked if they would agree to ll in a short questionnaire. As a result of this approach, 300 bank clients answered the questionnaire (150 institutional clients with business bank accounts and 150 individual clients with personal bank accounts). The following hypotheses have been formulated and veried through this study: H1: Success in the introduction and use of e-banking technology depends on the characteristics of banks Internet infrastructure users.

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H2: The primary users of e-banking systems in transition economies are institutional clients. H3: The adoption and use of e-banking systems depends on the personal prole of the users age, level of education and knowledge about the Internet technology. The main limitations of the research methodology are the limited sample of bank representatives that agreed to provide primary information about e-banking services (26.8 per cent of the banks functioning in Romania at the time of the survey), and the concentration of the respondent bank clients in two major Romanian cities. It can be considered, however, that the samples were highly representative since: all the banks providing primary information were oering e-banking services; the information provided was based on direct experience the respondents from the two large cities are representative of the urban Romanian population; the rural population seldom has access to Internet connection and to e-banking services.

DATA PRESENTATION AND ANALYSIS E-banking services offered by the Romanian commercial banks The investigation of the web presence/ strategy of the 41 commercial banks functioning in Romania in August 2001 is presented in the Appendix. Considering the denition of the dierent stages of ebanking strategy, the situation of Romanian banking strategies has been analysed and evaluated. The interviews with banks representatives The main objective of the interviews conducted with banks representatives was to identify the main factors responsible for the successful implementation and functioning of online banking services in the Romanian economy. Table 4 shows the aggregated results of this survey. The bank representatives have identied necessary requirements connected with the population, Internet system, government and the bank itself. These results conrm the hypothesis that: H1: The success in the introduction and use of e-banking technology depends on the characteristics of:

Table 4 The main requirements for the successful implementation and functioning of online banking services identified by banks representatives Elements Population Main factors Internet knowledge and skills: the capacity to use the Internet effectively Ethical behaviour: respecting and using fair rules of trade, avoiding opportunistic or harmful behaviour (eg software viruses, hacking, bank frauds) A developed Internet network Quick and reliable Internet connections Clear and comprehensive Internet legislation: legislative measures for data protection and data transfer, the punishment of online bank frauds Support of e-banking initiatives (Romanian National Bank, Ministry of Finance): fast track approvals for the implementation of e-banking systems; an effective control system for preventing bank frauds and financial crises Customer-focused approach: adapting the website to the skills and needs of users High quality/reliability of service Clear e-business objectives/strategy Appropriate training of bank personnel

Internet Government

Bank

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Government

Individual customer Bank Website E-banking Institutional customer Institutional customer Bank Website E-banking Individual customer Digital environment Physical environment
Figure 5 The interacting elements of the online banking environment

banks Internet infrastructure users. The successful introduction and functioning of e-banking services proves to be a complex operation which requires a harmonisation among all the interacting elements of the economic and nancial system (see Figure 5). THE QUESTIONNAIRE COMPLETED BY BANK CLIENTS The results displayed in Tables 5 and 6 conrm the hypothesis that: H2: The primary users of e-banking systems in transition economies are institutional clients. These ndings are quite logical taking into consideration that in the present Romanian economy: the institutions representatives (and especially the business managers/

entrepreneurs) have easier access to an Internet connection than the rest of the population the institutions representatives have a larger volume of banking transactions than the rest of the population, the online banking services oering advantages in term of time, place and funds administration the institutions representatives (and especially the business managers/ entrepreneurs) are more dynamic and entrepreneurial than the rest of the population, by the nature of their profession. The direct consequence of this phenomenon is the introduction by many Romanian commercial banks of an online banking service formulated and directed primarily at institutional clients. There is a signicant statistical relationship between the level of education of the respondents and their present use of e-banking (at a level of p 5 0.0001), and respectively with their intention to use e-banking services in the future (at a level

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of p 5 0.0001) (Tables 7 and 8). The number of present users among the respondents is quite low (4.7 per cent), but from these 85.7 per cent have completed university or postgraduate studies. The data from Tables 9 and 10 show that the propensity of respondents to use e-banking services at present or in the

future is inuenced by their knowledge of the Internet. The results are statistically signicant, especially for the future use of e-banking, demonstrate that, for the present moment, there are also some other factors that limit the capacity of respondents to use online banking services (such as the availability of a personal

Table 5 Crosstabulation between the present use of e-banking services and the type of respondents Type of respondents/Present use of e-banking Present use of e-banking N % 12 2 14 85.7 14.3 100 No present use of e-banking N % 138 148 286 48.3 51.7 100 Total N

Institutional clients Individual clients Total Chi square = 7.493 p = 0.006

150 150 300

50 50 100

Table 6 Crosstabulation between the future intention to use e-banking services and the type of respondents Type of respondents/Future use of e- Future use of e-banking banking N % Do not know if they will use e-banking in the future N % 43 94 137 31.4 68.6 100 Total N

Institutional clients Individual clients Total Chi square = 31.195 p < 0.0001

96 53 149

64.4 35.6 100

139 147 286

48.6 51.4 100

Table 7 Crosstabulation between the present use of e-banking and the level of education of the respondents Level of education of respondents/ Present use of e-banking Present use of e-banking N % No present use of e-banking N % Total N %

High school University Postgraduate studies Total Chi square = 30.542 p < 0.0001

2 7 5 14

14.3 50 35.7 100

216 54 16 286

75.5 18.9 5.6 100

218 61 21 300

72.7 20.3 7.0 100

Table 8 Crosstabulation between the future use of e-banking and the level of education of the respondents Level of education of respondents/ Future e-banking Future use of e-banking N % Do not know if they will use e-banking in the future N % 132 4 1 137 96.4 2.9 0.7 100 Total N %

High school University Postgraduate studies Total Chi square = 61.707 p < 0.0001

84 50 15 149

56.4 33.6 10.1 100

216 54 16 286

75.5 18.9 5.6 100

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Internet connection, nancial resources, etc). The availability of a personal Internet connection is one of the main reasons for the respondents avoiding the use of ebanking services even in the future (see Table 11). Other important reasons are lack of trust in Internet security, lack of trust in the bank/banking system, preference of a direct relationship with the bank representative and lack of Internet knowledge. The results shown in Tables 7, 8, 9 and 10 partially conrm the hypothesis that: H3: The adoption and use of e-banking

systems depend on the personal prole of the users: age, level of education, knowledge about the Internet technology. The statistical analysis has identied signicant statistical relationships between the profession, level of education and level of Internet knowledge of the respondents and the present or future use of e-banking services. No statistical relationship has been found between the age of respondents and the use of online banking services. Table 12 shows the importance allocated by institutional clients (Inst.) and individual clients (Ind.) to a number of factors for the successful introduction of e-

Table 9 Crosstabulation between the present use of e-banking and the level of Internet knowledge of the respondents Level of Internet knowledge/ Present use of e-banking Present use of e-banking N % 0 3 10 1 14 0 21.4 71.4 7.1 100 No present use of e-banking N % 50 129 93 14 286 17.5 45.1 32.5 4.9 100 Total N

No knowledge Some knowledge Medium level of knowledge High level of knowledge Total Chi Square = 10.169 p = 0.017

50 132 103 15 300

16.7 44 34.3 5 100

Table 10 Crosstabulation between the future use of e-banking and the level of Internet knowledge of the respondents Level of Internet knowledge/ Future use of e-banking Future use of e-banking N % Do not know if they will use e-banking in the future N % 40 69 28 0 137 29.2 50.4 20.4 0 100 Total N

No knowledge Some knowledge Medium level of knowledge High level of knowledge Total Chi Square = 46.157 p < 0.0001

10 61 64 14 149

6.7 40.9 43 9.4 100

50 130 92 14 286

17.5 45.5 32.2 4.9 100

Table 11 Reasons given by respondents who do not want to adopt e-banking services Reasons for not adopting e-banking services Lack of Internet knowledge and skills Lack of personal Internet connection Lack of trust in Internet security Lack of trust in the bank/banking system Desire a direct relationship with the bank representative Others Frequency 46 114 110 83 78 11 Percentage from 137 33.6 83.2 80.3 60.6 56.9 8.1

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Table 12 The importance of the factors identified by institutional clients (Inst.) and individual clients (Ind.) for the successful introduction of e-banking services Factors for successful introduction of e-banking / Level of importance Low importance Inst. Ind. Medium importance Inst. Ind. 52 9 31 85 83 79 30 92 14 48 40 High importance Inst. Ind. 98 150 141 150 67 29 120 150 58 136 71 25 Total Inst.

Ind.

Bank reputation Bank guarantees Internet infrastructure Internet security Users education Promotion of e-banking services

42

150 150 150 150 150 150

150 150 150 150 150 150

Table 13 The importance of the factors identified by institutional clients (Inst.) and individual clients (Ind.) for the successful use of e-banking services Factors for successful use of e-banking / Low Level of importance importance Inst. Ind. Bank reputation Bank guarantees Reliability of Internet connection Reliability of bank service Security Business ethics Medium importance Inst. Ind. 12 10 39 High importance Inst. Ind. 150 150 140 150 150 114 138 150 111 150 150 87 Total Inst.

Ind.

36

63

150 150 150 150 150 150

150 150 150 150 150 150

banking services. As can be seen, there are a number of dierences between the perception of institutional clients and that of individual clients: institutional clients allocate more importance to the Internet infrastructure, Internet security and the promotion of bank services, while individual clients consider more important customers education and the reputation of the bank. The bank guarantees have maximum importance for both categories of respondents. In comparison with Table 12, the level of importance allocated by institutional clients (Inst.) and individual clients (Ind.) to the factors for the successful use of ebanking services is dierent, a long-term perspective. For both categories of respondents (see Table 13) the bank guarantees, the reliability of the bank service and the security are extremely important. The application of fair rules of trade and the avoidance of opportunistic business behaviour (business ethics) as well as the capacity of the Internet connection

to provide fast and continuous data transfer (reliability of Internet connection) are considered to be more important by institutional clients. CASE STUDY: BTRNET THE FIRST INTERNET BANKING SERVICE INTRODUCED IN ROMANIA18,19 This case study has been compiled using information obtained from: the website of the Turkish Romanian Bank (BTR)19 a telephone interview with two BTR bank representatives Enance.ro online journal.18 Launched on 26th July, 1999 by the Turkish Romanian Bank, BTRnet was the rst Internet banking service using the newest technology introduced in the Romanian banking system. The implementation of BTRnet required an investment of $500,000 made over a one-

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year period. The decision to oer this service was based on research which showed that the banks clients frequently used computers (70 per cent of them had Internet access) and desired (90 per cent of them) to use an Internet banking service. The number of Internet banking transactions increased from 100 per month in July 1999 to 17,000 in October 2000, and the number of clients using this service exceeded 7,000 (80 per cent of which were institutional clients) of a total portfolio of 100,000 clients. During the period when BTRnet was available, over 113,000 transactions were performed, requested mainly by institutional clients.18,19 At present, any BTR client has real time access to their account 24 hours a day, seven days a week. They are able to: see their account balance at any time; obtain and print out statements of account; send transaction instructions to the bank such as to eect payments in Romanian lei to the state budget or to other beneciaries; purchase and sell foreign currency; perform foreign currency transfers; or integrate other retail operations such as credit/debit cards and salary payments. In the case of lei or foreign currency transfers, an additional facility allows such transfers to be ordered up to seven business days in advance.18,19 The service has two operation modes online and oine oering the possibility of reducing communication costs, which are in fact the only costs of this service. There are two types of access levels, generically called Maker and Authoriser (Maker allows visualisation, printing and editing of transactions, while Authoriser allows a transaction authorisation function in addition to the previous functions). In order to provide complete safety of transactions, BTR used the services of the German company Brokat Infosystems AG, a top provider of safety applications in

electronic commerce. For its online banking service, BTR uses the Twister software platform, oered by Brokat and used by over 1,600 companies worldwide (including Deutsche Bank). The BTRnet service meets all international standards regarding the safety of Internet transactions, ensured by the following elements:18,19 128 byte encryption technology, which ensures the condentiality and integrity of messages between clients and the bank digital identity certicates issued by authorised institutions like VeriSign and RSA Data Security rewalls that protect the banks internal network from any unauthorised access an automatic closing of the work session after three minutes of idle time. If an unauthorised access of an account has been attempted, by using false passwords and PIN codes, the access to that account would be blocked after three attempts. BTRnet oers its customers full mobility, as there is no requirement for the client to have special software on his or her PC. The client could perform banking transactions from any location: in the country or abroad, at the oce or at home, in a train or car. In terms of costs, this means that access to BTRnet requires only the payment of the local communication tari between a PC and the Internet provider. BTRnet bank do not charge connection fees or monthly subscriptions; clients only pay the fees relating to their specic transactions. As a rst in electronic banking transactions in Romania, BTRnet is available to both legal entities and to individuals. CONCLUSIONS This study has attempted to identify the main elements that inuence the successful

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introduction and functioning of e-banking services in a transition economy (Romania). In order to have a comprehensive view of this topic, many secondary sources of data have been consulted, and primary surveys have been conducted both with banks representatives and with bank customers. In order to understand the specic conditions of the Romanian market for ebanking services, a short presentation and analysis have been made of the Romanian economy, Romanian banking systems and the Romanian Internet network. A complete list of Romanian commercial banks is provided in the Appendix, with an indication of their stage of implementing online banking services. Three research hypotheses have been formulated: H1: Success in the introduction and use of e-banking technology depends on the characteristics of: banks Internet infrastructure users. H2: The primary users of e-banking systems in transition economies are institutional clients. H3: The adoption and use of e-banking systems depends on the personal prole of the users age, level of education and knowledge about the Internet technology. The results of the study have totally conrmed the rst two research hypotheses (H1 and H2), and partially conrmed the third one (H3). An important objective of the study was to identify the main factors considered by the banks representatives and by the customers to inuence the successful implementation and functioning of ebanking services. The results have shown that the process of online banking is

inuenced by many inter-related factors and institutions, including the quality and security of Internet network, the level of Internet knowledge and skills of the population and government support, as well as the Internet strategy of the bank and the quality/reliability of online banking services. The presentation of a mini case study The introduction of the rst e-banking service in Romania by the TurkishRomanian Bank oered the opportunity to identify the main stages of introducing a successful e-banking service in Romania: a thorough evaluation of the existing customers willingness and capability to use the new service the promotion of the new service support oered to clients low/no costs for clients good e-banking security. In comparison with the introduction of ebanking services in an economically developed country, the implementation of this facility in a transition economy is limited by a number of additional problems: the legislation (especially Internet and nancial regulations) may be unstable, vague and incomplete the nancial system is characterised by high levels of risk, the banks reputation is weak, and the oer of services is limited to the basic nancial instruments the Internet connection may be slow and unreliable the number of people with a personal Internet connection is small many people do not know how to use the Internet facilities opportunistic bank strategies. Despite these problems, it can be considered

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that the introduction of e-banking services in Romania has been successful. The banks have adapted their online oer to the specic conditions of the economy (low or no fees, customer support, online services mainly targeted to institutional clients) and some of them are starting to customise the services. Because the Internet is still used by a relatively small number of Romanians, some banks (Demirbank Romania) have already attempted to introduce mobile banking (using WAP browsers). Since the

number of mobile phone users is much larger than the number of Internet users in Romania, this new technology has the chance to become a popular service in the near future.20,21 The future development of this technology depends mainly, as this study has shown, on the capacity of the mobile phone companies to oer secure and fast Internet connections, on the capability of banks to provide secure and reliable ebanking services and on the legislative support of the Romanian government.

APPENDIX The list of Romanian commercial banks and the stage of their e-banking implementation16
Bank Date of coming into operation 27.12.1979 E-banking facilities The stage of e-banking implementation No Internet presence

Frankfurt Bukarest Bank AG, Frankfurt am Main Bucharest Branch MISR Romanian Bank, Cairo/Giza Bucharest branch Mindbank Banque Franco-Roumaine, Paris Bucharest branch The Romanian Bank for Development The Romanian Commercial Bank Banca Agricola Ion Tiriac Commercial Bank Eurom Bank Banc Post

No website

06.06.1987

No website

No Internet presence

10.07.1990 16.07.1990 01.12.1990

No website No Internet connection Online access to bank services mainly for corporate clients Online access to bank services No website e-banking facilities, mainly for corporate clients No website Online access to bank services, for individual and corporate clients Electronic banking available, lack of information on the bank website Website, e-banking service disabled Online banking service temporarily inactivated

No Internet presence No Internet connection Interactive stage

01.12.1990 01.12.1990 20.03.1991

Transactional stage No Internet presence Interactive stage

10.04.1991 26.11.1991

No Internet presence Interactive stage

Eximbank

14.04.1992

Interactive stage

The Romanian Bank Finansbank Romania

23.07.1992 10.12.1993

Presence stage Interactive stage

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E-banking in transition economies: The case of Romania

Bank Date of coming into operation 28.01.1994 02.03.1994 02.03.1994 02.03.1994 22.06.1994 E-banking facilities The stage of e-banking implementation Transactional stage Interactive stage Transactional stage Transactional stage Interaction stage

Transilvania Bank Romexterra Alpha Bank Romania The Turkish-Romanian Bank ING Bank N.V., Amsterdam Bucharest Branch

Piraeus Bank Romania ABN Amro Bank

03.05.1995 26.06.1995

Robank

20.12.1995

National Bank of Greece Bucharest Branch Citibank Romania West Bank Commercial Bank of Greece (Romania) Astra The Italian-Romanian Bank, Roma - Bucharest Branch Unirea Commercial Bank Libra Bank Daewoo Bank (Romania) Raieisenbank Romania

06.03.1996 26.06.1996 26.06.1996 25.07.1996 17.09.1996 13.11.1996 25.11.1996 25.11.1996 22.01.1997 29.04.1997

Online access to bank services E-banking facilities Online access to bank services Online access to bank services Online access to bank services Direct transfer of nancial electronic data into the electronic accounting systems of customers (rms) E-banking facilities Global corporate site, Romanian web page disabled Online access to bank services, mainly for corporate clients Website, no e-banking service Online access to bank services No website Online access to bank services Website, no e-banking service No website No website Online access to bank services No website Electronic banking; payment system integrated electronically with the accounting system of the rm Online access to bank services; payment system integrated with the accounting system of the rm; mobile banking using WAP technology Online access to bank services

Interaction stage Presence stage

Transactional stage

Presence stage Transactional stage No Internet presence Interaction stage Presence stage No Internet presence No Internet presence Transactional stage No Internet presence Transactional stage

Demirbank Romania

25.06.1997

Transactional stage

Bank * Austria Creditanstalt Romania

13.04.1998

Transactional stage

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Bank Date of coming into operation 13.04.1998 E-banking facilities The stage of e-banking implementation Site under construction

United Garanti Bank International N.V., Amsterdam Bucharest Branch Romanian International Bank Egnatia Bank (Romania)

Site under construction

13.04.1998 17.07.1998

No website Online service available for Greek clients; no specic website for Romanian clients Website, no e-banking service Website, no e-banking service No website Site under construction Global corporate site, no Romanian web page

No Internet presence Presence stage

Carpatica Commercial Bank The Romanian Savings Bank The Bank of Investment and Development Volksbank Romania Banca di Roma, Italia Bucharest branch

15.07.1999 17.09.1999 31.01.2000 10.04.2000 07.11.2000

Presence stage Presence stage No Internet presence Site under construction Presence stage

REFERENCES
1 Tuchila, R. (2000) Banking Services on the Internet, E-nance (Romania), www.enance.ro, October. 2 Cateora, P.R. and Ghauri, P.N. (1999) International Marketing. European edn, McGraw-Hill, Maidenhead. 3 EBRD Transition Report (2000). Executive Summary, www.ebrd.org/english/region/index.htm. 4 Miller R.R. (1998) Selling to Newly Emerging Markets, Quorum Books, Westport. 5 Buckley, P.J. and Ghauri, P.N. (1994) Statement of the issues, in Buckley, Peter J. and Ghauri, Pervez N. (eds.) The Economics of Change in East and Central Europe, Academic Press, London. 6 OECD Economic Surveys Romania (1998) OECD, Paris. 7 National Bank of Romania (1999) Main Macroeconomic Indicators, Annual Report, www.bnro.ro. 8 EBRD Transition Report Update (1998) EBRD, London, 1998. 9 Isarescu, M. (2001) The Romanian Economy in 2001, E-Finance (Romania), www.enance.ro, May. 10 Cochreo, S. (2001) Community Bank 11 12 13 14 15 16 17

18 19 20

21

Competitiveness Survey Web Census 2001, ABA Banking Journal, April, pp. 3238. Orr, B. (1997) Smaller Banks move into Internet banking, www.banking.com/aba/strate_0897.htm. Online Banking (1998) ZDNet UK, www.zdnet.co.uk/pcmag/labs/1998/12/onlinebanking/. Radoi, C. (2000) E-Risk, E-Finance (Romania), www.enance.ro, September. Safety fears for web banking (2000) BBC News Online, http://news.bbc.co.uk, August 1. Consumers shy away from e-banking (2000) BBC News Online, http://news.bbc.co.uk, October 2. National Bank of Romania (2001) Bank Register, www.bnro.ro, August 7. United Nations (2000) Internet infrastructure development in Transition Economies, Economic Commission for Europe, www.unece.org. BTRnet Service (2001) E-Finance (Romania), www.enance.ro, June. BTRnet (1999) www.btr.ro. Stefan, V. (2000) M-Banking and iTV-Banking alternatives for Internet Banking? E-Finance (Romania), www.enance.ro, December. Demirbank Romania S.A. (2000) WAP mobilebanking page, www.demirbank.ro.

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