Journal of Marketing Management 200319,1087-1109

Laura Bradley^ and Kate Stewart^

The Diffusion of Online Banking

The financial services environment has been subject to changes on many fronts. Technological change and the advent of the Internet are among the most dramatic and challenging areas of change for the sector. This paper looks at retail banking and its adoption of online banking, in particular the factors driving and inhibiting adoption by banks. An international Delphi study confirms the high level of importance of the Internet for retail banking. By 2011, it is expected that bank adoption ofthe Internet will be near universal. The key factors that are driving banks to adopt online banking are the adoption by other banks, competitive forces, consumer demand and the availability of technology. Working against adoption are banks' perceptions that the Internet does not offer enhanced ability to deal with customers as well as bank resistance to change, their existing legacy systems and the resources required to adopt.

University of Ulster

Keywords: banking industry, diffusion of innovation, on-line banking, delphi technique, marketing, distribution, future Introduction
In 1993 the editors of The International Journal of Bank Marketing concluded

that there remained much room for progress in terms of the implementation of marketing in the financial services sector (Wright and Ennew 1993). Writing in the same issue of that journal. Baker observed that bank marketing 'is more myth than reality'. In the intervening ten years, bank marketing has become more substantive. There is greater evidence of customer orientation, target marketing and the development of marketing policies beyond the promotional function, which dominated bank marketing in the early days. To the extent that banks have adopted marketing, such adoption has been forced by the many changes in the financial services macro environment. 1 Correspondence: Dr Laura Bradley University of Ulster, Coleraine, BT52 ISA, 02870324634, LM.Bradley@ulster.ac.uk 2 Dr Kate Stewart, University of Ulster, Newtownabbey, BT37 OQB ISSN0267-257X/2003/9-10/01087 + 22 8.00 Westburn Publishers Ltd.

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These changes include deregulation, increased competition and increased consumerism. In Europe, domestic competition restrictions have been eliminated changing the scope and scale of banking services (Flier et al. 2001). There has been erosion of boundaries between banks and their competitors (Van der Lugt 1997; Considine 1999; Park 1999). The lines of separation between the various constituents of the financial service industry, that is, insurance, brokerage and banking are also blurring. With reduced barriers to entry, competition has increased bringing retail banking closer to a perfectly competitive market (Howcroft and Durkin 2001). In tandem with increased competition, the consumer environment has also changed. Modem day customers are better educated and better protected and have more choice of financial services and providers. They are seen to be increasingly sophisticated and less loyal (Avkiran 1999; Howcroft and Kiely 2000). Changes in the regulatory, competitive and consumer environments all serve to force attention on the consumer and promote market orientation. In this context it is not surprising that the general rate of innovation becomes more rapid (Eika and Reistadbakk 1998; Nellis 1998; Porter 2001; Flier et al. 2001). In addition, marketing management grows in importance and strategy development becomes market-led, if only by default. The subject of this paper, adoption of online banking, offers a window of insight to the contemporary financial services sector. Online Banking The development of online banking has come about as part of the development in information and communication technology (ICT). OrJine banking is a form of electronic banking offered via the Internet whereby consumers can perform and transact financial services in a virtual environment. In essence, online banking is an electronic customer interface and an alternative channel of distribution. So profound are the changes it brings about that Hensmans et al. (2001) state that the Internet is not only a distribution channel but also a "driver of comprehensive industrial change" (P241). Online banking offers advantages as a retail channel, namely accessibility, direct communications, cost reductions and new markets (Anderson 1995; Verity 1995; Cronin 1996; Daniel and Storey 1997; Doherty et al. 1999; Hughes 2001). The cost effectiveness of online banking, compared to branch based or telephone banking is a widely discussed issue (Kelly 1996; Tilden 1996; Katz and Aspden 1997; Daniel 1997). While the Internet affords banks the opportunity to increase their market coverage and to better track and target customers it gives customers the possibility of information and price transparency as well as '24/7' accessibility. Traditionally retail banking has

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depended on the branch as the main charmel of distribution. Additional financial services charmels include ATM's, telephone, PC and latterly orUine banking (Mols et al. 1999). Online banking is potentially the most radical innovation, especially in the context of barJcs dominated by the branch as the means to provide service to customers. Online banking gives rise to many questions about adoption. This study concerns three such questions: to what extent will banks adopt online banking? What is driving adoption and what is inhibiting adoption of online banking?

Diffusion of Innovation
Research on diffusion of innovation was introduced to the domain of marketing in the 1950s. Diffusion of innovation theory attempts to identify patterns and rates of adoption of irmovation. This is especially significant in consumer markets in terms of attempting to forecast demand and market growth (Mahajan et al. 1990; Valente 1993). Process theory dominates diffusion of innovation studies such that innovation is believed to flow from providers and early adopters through to the potential adopting population. Numerous models have been developed using mathematical and statistical analysis to map diffusion within various industries (Rogers 1983 and 1995; Barra 1986; Mahajan et al. 1990; Chaudhuri 1994; Abrahamson and Rosenkopf 1997; Gallouj 1998). Many studies have identified factors that influence diffusion of an irmovation at a generic (non-industry specific) level. Rogers' work (1983) is the most cited regarding the characteristics of the innovation itself and their influence on diffusion rates. The factors he identifies are: relative advantage of the innovation over current products and methods, compatibility of the innovation with existing modes and customer values, trialability, observabilty and complexity of the innovation, and the perceived risk associated with the innovation. While the characteristics of the irmovation influence its diffusion, so too do the aspirations of the organisation. These include achievement of competitive advantage, reducing costs, and protecting an organisation's strategic position (Bass 1980; Ufah 1998; Tidd et al. 1997; Johannessen et al. 1999). Organisational diffusion of innovation is promoted by the organisation's desire to become superior in meeting customers' needs, produce a competitive product or develop superior competencies within their organisation Qohne and Davies 2000). To the extent that the adoption of an innovation can yield competitive advantage, organisations will adopt and diffusion will be driven by this pursuit of competitive advantage. However, as the innovation becomes widely adopted, the competitive advantage diminishes and the innovation becomes a necessary competitive requirement

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(Batiz-Lazo and Wood 1999; Porter 2001). In general, the more intensively competitive an industry the higher will be the rate of imitation of innovations and the faster the pace of adoption (Mansfield 1968; Romeo 1977). Chandrashekkaran et al. (1999) suggest that the sheer number of competitors in an industry breeds a need to innovate and the witnessing of the volume of innovation adopted by competing firms also creates its own pressure. It is ironic that the need to innovate leads to imitation. As retail banking has attracted more competitors and become more competitive, it could be expected that the rate of diffusion of innovation will have accelerated. The influential role of networks and communication in diffusion of innovation has been identified in numerous studies (Shao 1999; Drazin 1990; Axelsson and Easton 1992; Alter and Hage 1993; Abraham and Rosenkopf 1993). Thus social exchange among network parties includes knowledge and expertise about innovations. Networks create the need to conform to the innovative levels of those organisations within the social network. Involvement in networks and having contact with other organisations and individuals can cause a technological innovation to be initiated and adopted. This is a central tenet of bandwagon theory (see Abraham and Rosenkopf 1993). The characteristics of organisations also influence their propensity to be innovative. The more innovative an organisation, the easier and faster will be the pace of diffusion of innovation. The structure of an organisation plays a part in nurturing diffusion of innovation (Ray 1974; Tidd et al. 1997). Organic structures, which are open and informal, nurture and encourage innovation, whereas mechanistic and bureaucratic structures hinder and discourage innovation (Bums and Stalker 1961; O'Neill et al. 1998; Johannessen et al. 1999). Investigation into the relationship between organisational size and propensity to innovate tends to suggest that larger organisation behave in a more pioneering fashion (Brookman and Morgan 1999). This is explained by their ability to absorb higher risks and costs and having a higher level of expertise to ensure first mover advantages (Malecki 1977; Davies 1979; Brown 1981; Rogers 1995; Ufuah 1998). Thus a crude categorisation of issues affecting diffusion of innovation among organisations suggests that three sets of facts are at work: the characteristics of the innovation; the characteristics of the sector; and organisational characteristics. These characteristics act as drivers and/or inhibitors of the diffusion of innovation. Diffusion and Online Banking Online banking can be categorised as a radical, discontinuous and disruptive innovation in that existing industry practices are significantly changed. Only a few studies have investigated diffusion of innovation w^ithin the retail-

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banking sector. Jayawardhena and Foley's (2000) survey of United Kingdom online banking facilities suggests that the pace of adoption by the retail banks of online banking is actually very slow. However, a study by Flier et al. (2001) found that the pace of bank adoption of the Internet in Europe has been much faster than the adoption of previous technology such as ATMs or EFTPoS. At a fundamental level, the industry adoption decision is governed by supply and demand side factors - that is, consumer demand for online banking and the available supply of new technology, particularly where it can reduce reliance on the branch network (Harvey and Filiatrault 1991; McGoldrick and Greenland 1994; Devlin 1995; Daniel 1999). More specific drivers of bank Internet adoption have been identified. These include protection of reputation, competition, cost savings, mass customisation, enhancement of marketing and communication activities, and retention and attraction of consumers (Daniel and Storey 1997; Tomkin and Baden-Fuller 1998; Mols 2000). Contrary to these drivers, security concerns have been highlighted as the most important inhibitors of the diffusion of online banking (McCahon 1999; Long 2000). In addition, lack of user friendly technology, low consumer demand, high initial set up costs, redundancy of existing legacy systems and lack of suitable skills have acted as inhibitors (Howcroft and Lavis 1986; Daniel and Storey 1997; Mols et al. 1999; Esser 1999; Daniel 1999). For all that is known about diffusion of innovation and the banks' adoption of online banking, much is unknown. Many studies have called for further investigation of the diffusion of oriline banking such as Daruel and Storey (1997) and Daruel (1999). In relation to diffusion of innovation. Chin and Marcolin (2001) identify the need for research that addresses the adoption and use of technology in contemporary settings. This study is structured as detailed in Figure 1. Having established the need for research, the overall aim of this study was to examine bank adoption of online banking and in particular to identify the drivers and inhibitors of online banking.

Methodology
A multi-method approach was adopted. This approach, especially the triangulation of objective and subjective methods, facilitates explanation and prediction and helps to develop a more holistic view (Jick 1979; Perry et al. 1999).

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Laura Bradley and Kate Stewart Exploratory Interviews

Development of Delphi Questionnaire

Recruitment of International Delphi Panel

r

Delphi Study

Round 1 Global Experts

Round 2 Global Experts \

Round 3 Global Experts

Quantitative

Qualitative

SPSS

Thematic Content and Network Analysis

Figure 1. Research Methodology

Initially, exploratory interviews were conducted in Northern Ireland, the Republic of Ireland and the United States (U.S.) with senior banking officials. The interviews explored the nature of online banking as an innovation, its diffusion, factors influencing the diffusion, and the future of online banking. These interviews were combined with the literature on diffusion of innovation to inform the development of a questionnaire which was subsequently piloted and refined. The resultant questionnaire formed the mainstay of a Delphi study involving an international panel of experts. Delphi is a futures methodology. The decision to select a futures methodology was multi-fold. First, little is known about the future of online banking and little historical data exists therefore judgmental analysis of the diffusion of online bariking is required. Secondly, there has been a tendency towards an historic focus within diffusion of innovation research. Thirdly,

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the Delphi technique is suited to electronic execution thereby facilitating an international study. Finally, this technique has not been widely used within a retail banking industry setting or investigation of diffusion of online banking. The Delphi technique is used to bring together the ideas of participants (known as panellists/experts) on a given subject. It relies on a process of collecting ideas or judgments from experts, giving feedback to experts and reforming ideas until it is clear that the ideas will not change. Consensus may or may not be achieved. Linstone and Turoff (1979) described Delphi as "a method of structuring a group communication process so that the process is effective in allowing a group of individuals, as a whole, to deal with a complex problem" (P574). The technique can be used to obtain judgements that may in turn inform planning, problem-solving and overall decision making (Masini 1993; Dunham 1998). The Delphi Panel in this study was selected by purposive-convenience sampling of people and organisations with a known involvement or expertise in online banking. Individuals were required to be in a management role and have knowledge of online banking developments or ecommerce in general. Other experts were identified based on their publications within practitioner and academic journals regarding online banking. In total, 71 experts agreed to participate. Although small in statistical terms, the sample was both expert and international. The experts were from retail banks, non-financial service entrants, consultancy, academia and model online retailer backgrounds, in both Europe and the United States. All experts were recruited using electronic mail since this was chosen as the mode of communication for the empirical study. The study was due to be completed during December 2001, however, events of September 11* in the U.S. distracted the experts. Because of this the study was limited to two main Delphi rounds, plus a final round being limited to collecting panel categorisation data. It was felt that the panel attrition would have been insurmountable. In addition, stability of opinion had emerged. The questionnaire considered the future of online banking and factors influencing the adoption of online banking. The majority of questions were closed and used scales, principally Likert scales. Panellists were also asked to provide justifications for their answers.

Results
The issues of divergence and convergence of opinion are fundamental to the Delphi technique. For the findings of both the drivers and inhibitors, based on the findings of a Wilcoxon Signed Rank Test, no significant differences were found between rounds. Although some deviant responses remained.

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stability of opinion emerged between Round 1 and Round 2. World-Wide Adoption hy 2011 In terms of the future of orUine banking, the study predicted that 84.12% of retail banks globally would have adopted online banking by 2011. This represents near universal adoption. Non-adoption by the retail banking industry will be rare. This would suggest that online banking is (or soon will be) a basic requirement of operation, rather than a source of sustainable competitive advantage. Drivers of Online Banking Adoption by the Retail Banks The global experts were asked to rank the overall importance of various drivers of online banking adoption on a five point scale, ranging from 'very great importance' (5) to 'No importance' (1). Table 1. Drivers of Online Banking Adoption Driver Number of other retail banks adopting Competitive forces Consumer demand Availability of technology Suitability of online facilities to banking Enhanced ability to deal with customers Cost reductions Rank Great Great Great Great Great Great Very Great N 32% (n = 16) 32% (n = 16) 28% (n = 14) 20% (n = 10) 46% (n = 23) 50% (n = 25) 14% (n = 7)

As Table I shows, the drivers that are ranked of 'great importance' in the adoption of online banking are: number of other retail banks adopting, competitive forces, consumer demand, technological availability, suitability of online facilities to banking and enhanced ability to deal with customers. Within this context number of other retail banks adoption refers to the existence of peer pressure and isomorphism within the industry. Experts were also asked to identify and rank any 'other' factors driving the adoption of online banking. Cost reductions were identified as of 'very great importance' by a small number of experts. The 'other' drivers identified by the experts were ranked as of less importance. Qualitative Findings - Drivers Experts were asked to justify their answers to questions identifying drivers and ranking their importance. These qualitative responses helped to elaborate the quantitative responses to the closed questions. These qualitative themes are indicative of opinions raised by a large majority of the experts.

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Overall, the drivers could be categorised based on their relationship to the bank, that is, they are largely external to banks (as opposed to internal). This belief is confirmed in a typical statement: "extemal factors will be more powerful
than internal factors" (Academic 7).

Enhanced ability to deal with customers, considered to be of 'great importance', was seen as an inherent benefit of online banking by a number of the global experts. For example, online banking is considered to be a "new
way to reach customers and enhance the bank's offering" (Bank 2).

The fact that banking activities are easily digitised and suited to electroruc delivery is a key driver: this was raised by a substantial number of experts "banking is of course very suitable to electronic channels," (Consultant 4). Non Financial 4 indicated that "suitability of on-line facilities to banking has already been mostly proven."

Cost reductions and the costs involved in implementation are considered very important. However the retail banks perceive that cost reductions will only occur as consumer adoption increases - "The main factor influencing the
rate of introduction of online banking is consumer demand and potential cost reduction" (Bar\k 20).

The majority of experts argued that competition has created a situation whereby online banking is considered to be a hygiene factor, as opposed to a source of sustainable competitive advantage. The marketing and promotional activities of the competition that have adopted online banking, as stated by Bank 1, the emergence of new entrants using the technology and defence of market share are considered to be the main competitive forces. For
example, "the banks seem to be motivated by demand from customers and observations of competitors - they seem to be using the newest technology"

(Academic 5). This suggests that, by not adopting, banks would place themselves at a competitive disadvantage. Customer demand, although currently low, is considered a crucial driver, by a number of experts. For example, "banks will launch online banking
irrespective of the ease of development and ease of trial, because of customer demand"

(Barik 20). Bank 1 argued that competition and customer demand operate in tandem as drivers. Technology is also considered of great importance as a motivator of online banking adoption by the retail banks because "technology is relatively easy and
available using Internet protocols, as compared to the past when online banking was expensive to implement and of high technological risk" (BarJc 1). However, Bank

13 was cautious stating that technology develops so rapidly that retail banks will always be playing catch up. One of the global experts felt that "it is very
easy to talk about what can be done in an ideal world but getting the technology to perform is crucial" (Academic 8).

The issue of government intervention presented an area of disagreement.

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The quantitative findings stated that government intervention was a driver of 'no importance'. The qualitative responses apparently contradict the quantitative in this case. Experts argued that governments were considered important because of their legal and regulatory influence on the retail banking industry. Since decisions could only be taken in light of the governments' decisions on legal and regulatory matters government influence is great. For example, "government intervention is naturally of importance in situations where e.g. government is ruling about legally binding digital signatures etc." (Bank 19). Experts also pointed to the influential role of government - as Technology 1 put it "by restraining banks from closing down small branches [andj forcing through digital TV." The belief is that government involvement will continue, indeed will increase in the future and, as such, must be of importance in driving online banking. Inhibitors of Online Banking Adoption by the Retail Banks Experts were asked to indicate on a five-point scale the level of importance of a range of inhibitors from 'very great importance' (5) to 'no importance' (1). The key inhibitors are outlined in Table II.

Table 2. Inhibitors of Online Banking Adoption Inhibitor

Ability to deal with customers Existing legacy system Lack of innovation culture in banking Consumer demand Availability of technology Costs Difficulty of trial Difficulty of development Evidence of returns Communication by other industry members Influence by other industry members Rank Great Great Some Some Some Some Some Some Some Some Some N 30% (n = 15) 42% (n = 21) 36% (n = 18) 54% (n = 27) 44% (n = 22) 38% (n = 19) 46% (n = 23) 44% (n = 22) 38% (n = 19) 54% (n = 27) 46% (n = 23)

The inhibitors ranked of 'great importance' were lack of enhanced ability to deal with customers and existing legacy system. Lack of innovation culture, consumer demand, availability of technology, costs, difficulty of trial and development, evidence of returns, communication by others in the industry and influence by other industry members were ranked as of 'some importance' in inhibiting the adoption of online banking. Qualitative Findings - Inhibitors Again, experts were asked to justify their ranking of the inhibiting factors

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and these responses gave qualitative insight to the quantitative findings. A number of issues were developed. In relation to internal bank issues, specifically existing legacy systems, bank culture in relation to innovation and difficulty of trial and development in relation to the system emerged as key themes in the qualitative justification. Technological issues are inhibiting adoption. Specifically, banks already have information technology systems bedded in from initiatives over the last three decades. Any new system would have to acconunodate these systems. This 'legacy system' issue was identified as being a very important inhibitor in both the quantitative responses and in the justification, by a substantial number of experts. Typically, legacy systems were seen not just as an implementation issue but inhibiting the adoption decision itself. As one
expert stated "[legacy systems] affect the potential introduction of online banking"

(Non Financial 3). The quantitative results ranked the lack of an innovative culture' as an inhibitor 'of some importance'. This is a traditional image associated with the retail banking industry. Some experts elaborated on this in the justification suggesting that bariks are non-innovative. As Technology 3 stated, " they are
very happy to sit still unless some competitor changes the landscape."

The difficulty of development and trial for the retail banks of online banking was considered of 'some importance' within the quantitative results. The qualitative findings however suggest that difficulty of trial and development is not considered to exist and has little impact on the industry rate of online adoption. Consultant 6 stated that the development and trial of any innovation is inherently risky and tends not to be easy, a characteristic which is not specific to online banking. Further to this. Academic 3 summarised the situation that online banking is significantly important and as such trial is not an issue for the industry players but more so for customers. The key external inhibiting factors raised relate to customer demand, technology and the influence by other industry members. The quantitative findings ranked the (in)ability of online banking to enhance the banks' dealing with customers as an inhibitor of 'great importance'. In other words, banks would not be any more capable to deal with customers as a result of online banking and this therefore inhibits their adoption of online banking.
As one expert stated: "the crucial issue here is whether online facilities will strengthen or weaken bank's relationships with customers and jury is still out on that one. If, ultimately, technology empowers customers to switch between offerings more easily, then the net result may be greater financial promiscuity, which I assume the banks would want to avoid as holding on to existing customers is far less costly than acquiring new ones" (Academic 2).

Customer demand is considered to be an inhibitor, of 'some importance'.

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as evidenced by the fact that "on-line customers today represent only a small portion of the total customer base" (Bank 17). Academic 5 reiterated this point stating: "the main barrier is the customers and their knowledge of and use of the technology."

Technological issues are considered of 'some importance' in inhibiting online banking. The main technological issue raised, by the majority of experts, relates to bandwidth. Currently narrow bandwidth is predominant and the limitations of this irUiibit adoption. The issue of broadband is however considered to be approaching redundancy as Bank 17 summarised
by arguing that "connection speeds will continue to increase and will enable more robust services and communications". Overall the belief is that "the ability of banks to grasp technology issues is a key issue" (Consultant 5).

Discussion
This paper has presented selected quantitative and qualitative findings from a Delphi study into the diffusion of online banking among the retail banks. The original analysis of the literature on diffusion of innovation found that three main sets of factors are influential in diffusion of innovation. These are the characteristics of the innovation, the characteristics of the sector and the characteristics of the company. As this was a sector based study the findings can be categorised into sector based characteristics and innovation characteristics. In addition, the influences fall into two areas namely positive influences on bank adoption (drivers) and negative influences (irihibitors). These findings are summarised in Figure II.
INNOVATION CHARACTERISTICS SECTOR CHARACTERISTICS

DRIVERS

Availability of technology Suitability of banking to online Costs reductions possible Ability to deal with customers Ability to deal with customers Rapidity of technological change Legacy systems Bandwidth

Other banks adopting Competitive forces Consumer demand (long term) Government influence

INHIBITORS

Lack of innovative culture Consumer demand (short term)

Figure 2. Representation of Industry Adoption of Online Banking

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Discussion ~ Drivers As was expected, the study found that the availability of technology is essential to drive diffusion of online banking. This finding confirms the role of technology push presented by Jayawardhena and Foley (2000), Wright and Howcroft (2000) and Mulligan and Gordon (2002) who identifled that availability of technology is a significant issue in relation to the introduction of online banking. The diffusion of online banking is driven by the cost reductions it offers, a much sought after benefit in the context of pressurised margins. This is a widely discussed area in relation to online banking and distribution channel strategy. In general, distribution channels, regardless of industry, are a costly asset, (West 1992), therefore any potential cost reductions will act as a significant driver. The desire for cost reductions was a key driver of the diffusion of ATMs according to Hannan and McDowell (1984). The study also confirms the work of various authors who have argued that online banking represents cost reductions such as Carman and Tournois (1998), Yaklef (2001) and Aladwani (2001). The suitability of banking to online facilities is considered a driver of diffusion of online banking by the Delphi panel. Indeed, this suitability could be evidenced in the number of other retail banks adopting and level of industry competitive activity as a driver of online banking diffusion. That banking activities are easily digitised has been observed by Jayawardhena and Foley (2000) and Yaklef (2001). The global experts argued that online banking is driven by the desire by the industry to enhance their ability to deal with customers. This perceived relative advantage is an inherent characteristic within the Roger's (1983) model of diffusion of irmovation. In terms of sectoral characteristics, the number of other retail banks adopting represents a significant positive influence on the diffusion of online banking. This supports existing studies including Pennings and Harianto (1992) and Molyneux and Shamroukh (1996) in their specific investigation within the banking industry. These authors concluded that as subsequent banks adopt a new product the more impact this has on the other banks' decision to adopt. The current study found that competitive forces drive the industry diffusion of online banking, confirming Flier et al.'s (2001) argument that industry competition leads to increased innovative activity. The study also revealed that the adoption of online banking is considered to be a defensive measure against competitive activities and is now viewed as a competitive necessity within the industry. West (1992) and Mallen (1996) have previously argued that competitive forces drive distribution channel strategy. A hygiene requirement refers to a basic offering which is considered to be necessary within an industry to operate. OrUine banking is a hygiene requirement and.

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as such, offers no competitive advantage, but must be a fundamental part of all banks. Specifically, the identification of online banking as a hygiene factor confirms the work by Hitt and Frei (1999), Carman and Toumois (1998), Norfolk (1999) and Porter (2001). This is in contrast to the general diffusion of innovation theory which holds that diffusion of innovation leads to a competitive advantage as argued by Tushman and Anderson (1986) and Lieberman (1987). This study concludes that orUine banking is a competitive necessity and not a competitive advantage. While consumer demand acts as a driver, lower than expected levels of consumer demand are inhibiting bank adoption of online banking. Low levels of consumer demand has been observed by Daniel (1999), Mols (1999) and Christiansen (2001). As an inhibitor low consumer demand is considered in the short term. In the longer-term demand will increase and this will cease to act as an inhibitor. Discussion ~ Inhibitors Enhanced ability to deal with customers has emerged in this study as a driver. It also has emerged as an inhibitor. Some plausible explanations exist. First, this may relate directly to the issue that online banking offers little relative advantage over competitors in dealings with customers. Secondly, it is possible the question was misunderstood. Finally, a rather technical observation suggests that online banking does not offer an enhanced ability to deal with customers in general given that such a small segment of customers has adopted online banking. Bank 17 sununarises the situation as follows.
"Online customers today represent only a small portion of the total customer base. While an enhanced ability to deal with them may be valued, it must remain in perspective".

The study found that existing banking systems have a key role to play in inhibiting the diffusion of online banking. Goodbody Stockbrokers Research (2001) and Hughes (2001) previously argued that integration of existing systems with new on-line systems is difficult for the industry. Investment in existing systems has been raised as a difficulty in relation to the retail banking industry by Kalakota and Frei (1997) and Mulligan and Gordon (2002). Although legacy systems are widely believed to be an inhibitor, Mols (2001) and Porter (2001) argue that the issue is overestimated. However, this study confirms the importance of legacy systems as inhibiting the diffusion of online banking. This issue also relates to the characteristics of the innovation itself and, in Rogers' terms, the compatibility of the innovation with its predecessor.

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Irorucally, technology also plays a role as an inhibitor to the diffusion of online banking. Because of the rapidity of changes in technology banks are cautious in their speed to market with online banking. As an innovation, online banking is in its infancy and still being modified and developed. Some banks may prefer to wait until online banking technology matures before adoption will take place. Lack of penetration of broadband is inhibiting service level development. Rai et al. (1998) and Hensmans et al. (2001) previously argued that bandwidth improvement would accelerate the future rate of diffusion of online banking. Bandwidth is an overarching e-commerce issue and not unique to the banking industry. An overall conclusion drawn from the study is that the lack of innovation culture inherent within the retail banking industry has a substantial inhibiting force in relation to the diffusion of online banking. This confirms Hannan and McDowell's (1984) study of the retail banking industry, which found that that an innovation culture is lacking. Based on a study of the Hong Kong retail banking industry, Llwellyn (1995) concluded that the industry is adopting a wait and see approach, a non-innovative strategy, in relation to online banking adoption. Finally, contrary to previous arguments, such as Norfolk (1999), McCahon (1999) and Long (2000) security of online systems did not emerge as a strong or significant inhibitor.

Conclusions
What is clear from the study is that online banking will be available from nearly every bank by 2011. That investment will be worked to achieve desired returns. For that reason alone, over the next decade it will be difficult for customers to avoid the promotion of online banking. For near-universal adoption to be the case in 2011, the current mix of drivers and inhibitors will change. This study has identified the drivers of banks' adoption of online banking. These are the technology itself, its relative advantage including cost reductions and the enhancement to bank ability to deal with customers, consumer demand and competitive pressures. The drivers do not operate exclusively but in the context of inhibitors. In general inhibitors get lesser treatment in diffusion of innovation studies. In this case the identified inhibitors are the rapidity of technological change, the banks' existing systems, banks' lack of innovative culture and low levels of consumer demand. Already these drivers and inhibitors have conspired to make online banking merely an industry requirement, rather than a source of sustainable competitive advantage. The question remains as to how this mix of drivers and inhibitors will change to bring about much more widespread bank adoption of online banking. It carmot be assumed that today's drivers and

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inhibitors are the accelerators and decelerators of tomorrow. For bank decision-makers, online banking raises many strategic marketing issues. As an additional channel of distribution, how can it be managed to reduce costs? What patterns of online consumer adoption are likely, or indeed desirable? The 'who, what, when, where, why and how' of online consumer behaviour are only emerging as the medium develops. Limitations of Current Study and Future Research This study is significant in the use of an innovative methodology in an international research arena to examine a highly topical area. The study is subject to a number of limitations. First, the findings apply to the banking sector only and there are no grounds for generalising the findings to any other sector. Secondly, the sample size of 70 limits statistical analyses and only non-parametric statistics were used. However, triangulation of both quantitative and qualitative data increases the validity of the findings. Finally, issues involved in the international decision to adopt online banking such as country specific drivers and inhibitors were beyond the scope of this study. Further investigation is required of the diffusion of online banking from a futures perspective to identify the factors which will accelerate or decelerate the rate of diffusion of innovation in the future. This study advocates increased use of the Delphi technique through an electronic medium. Use of electronic media greatly facilitates international studies, which are appropriate given the nature of contemporary business. In addition, understanding of consumer adoption of online banking needs to be developed. This study has taken online banking as an innovation per se. However, different forms of online banking will develop as the innovation matures. Likewise how each bank uses orUine banking will vary, giving room for the development of advantages for some. Examining orUine banking from these perspectives, beyond diffusion of innovation, would provide valuable insight to the changing landscape of competitive marketing management in the financial services sector.

References
Abrahamson, E. and Rosenkopf, L. (1993), "Institutional and Competitive Bandwagons: Using Mathematical Modelling as a Tool to Explore Innovation Diffusion," Academy of Management Review, Vol. 18, No. 3, pp. 487-518. Abrahamson, E. and RoserJcopf, L. (1997), "Social Network Effects on the Extent of Innovation Diffusion: A Computer Simulation," Organisation

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About the Authors Laura Bradley is a Lecturer in Services Management at the University of Ulster's Coleraine campus. Her research interests are in the area of services marketing, bank marketing and innovative research methodologies. She is a regular at the Academy of Marketing Conference and has had her work published in International Journal of Bank Marketing and Marketing Intelligence and Planning.

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Kate Stewart is a Senior Lecturer in Marketing at the University of Ulster's Jordanstown campus. Her work has been published in Journal of Marketing
Management, International Journal of Bank Marketing, Service Industries Journal

as well as being presented at many national and international marketing conferences. Her research interests are largely in the area of financial services marketing, online banking and customer complaining behaviour. As a result of her involvement in the Teaching Company Scheme, she has written and published case studies on various aspects of marketing practice.